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Growth effect of trade and investment in Sub-Saharan Africa countries: Empirical insight from panel corrected standard error (PCSE) technique

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  • Fredrick Ikpesu
  • Olusegun Vincent
  • Olamitunji Dakare

Abstract

The pre-eminence of trade and investment in the economic prosperity of developed and developing countries cannot be overemphasized. Many studies have shown a strong positive impact of trade on economic growth across developed and the emerging market. However, very little is known about the simultaneous effect of trade and investment on growth in SSA when institutional control variables are introduced in the model. Therefore, this study examines the role of trade and investment in the growth process in the SSA using trade openness (% GDP), export (% of GDP) and import (% of GDP) as a measure of trade. We embrace an ideographic perspective that allows methodology and design that are sensitive to the nature of the study by deploying panel corrected standard error (PCSE). In this paper, we draw on 35 countries within the SSA. The research outcomes reveal that trade domestic investment and import affect growth in the region positively while export affects growth negatively. A possible reason for this is the nature of export of sub-Saharan African economies which are mostly affected by price volatility in the global market among other factors such as low prices, vagaries of weather, etc.. We discuss the policy implication of the study.

Suggested Citation

  • Fredrick Ikpesu & Olusegun Vincent & Olamitunji Dakare, 2019. "Growth effect of trade and investment in Sub-Saharan Africa countries: Empirical insight from panel corrected standard error (PCSE) technique," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1607127-160, January.
    • Handle: RePEc:taf:oaefxx:v:7:y:2019:i:1:p:1607127
    DOI: 10.1080/23322039.2019.1607127
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    14. Lu, Zhou & Gozgor, Giray & Mahalik, Mantu Kumar & Padhan, Hemachandra & Yan, Cheng, 2022. "Welfare gains from international trade and renewable energy demand: Evidence from the OECD countries," Energy Economics, Elsevier, vol. 112(C).
    15. Williams Ohemeng & Kenneth Ofori-Boateng & Elvis Kwame Agyapong & Joseph Darmoe, 2023. "Environmental risk and growth in foreign direct investment: Is the composition of FDI in sub-Saharan Africa a speculative type?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2243695-224, June.
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    17. Folasade Bosede Adegboye & Olumide Sunday Adesina & Felicia Omowunmi Olokoyo & Stephen Aanu Ojeka & Victoria Abosede Akinjare, 2021. "The Impact of Trade Openness and Foreign Direct Investment on Economic Welfare in sub-Saharan Africa," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 389-400, April.
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