Trade Effect of Chinese Belt and Road Initiative: Evidence from Sub-Saharan African Countries
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Date
2024-07-23
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A.A.U
Abstract
Trade Effect of Chinese Belt and Road Initiative: Evidence from Sub-Saharan African countries
Degu Zinabe Fentaw
Addis Ababa University, 2024
Chinese Belt and Road Initiative (BRI) is the most recent and inclusive initiative launched in 2013 with the goals of policy coordination, facilities connectivity, unimpeded trade, financial integration and people to people interaction between China and member countries. Since BRI would bring improvement in the infrastructure gap, its contribution in deceasing cost of trade was expected very significant. But its real impact on the case of Sub-Saharan Africa region wasn’t well indicated by other empirical studies. The main objective of the current study was to examine the trade effect of BRI on Sub-Saharan Africa region. This study employed a panel data set from 2018-2022 involving 26 reporting and 22 partner sampled countries. It used augmented gravity model with PPML estimation technique. According to the findings of this study, BRI has a positive contribution in trade; it resulted in up to 7.1% trade creation effect for Sub-Saharan Africa region. GDP of reporting countries, GDP per capita of both reporting and partner countries, bilateral exchange rate, land locked, common border, common colonizer and having common official language were significantly associated variables with the bilateral trade. BRI improves trade performance of Sub-Saharan Africa region. But it is strongly recommended that policy harmonization, addressing production bottlenecks particularly in the manufacturing sector, measurements in knowledge transfer should be emphasized to optimize the contribution of BRI.