The Determinants of Export of Primary Commodities in Sub Saharan Africa: A Panel Co - Integration Approach
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Date
2010-05
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A.A.U
Abstract
SSA is generally characterized by a heavy dependence on export of primary commodities. Export
income is the largest resource inflows in the region. However, the performance of the exports of
primary commodities is devastating. And this is a source of shock to the economy due to the
volatility & continuous decline of the prices of their exports. Both internal and external factors are
responsible for the poor performance of the sector. The study employed panel data to empirically
analyze these determinants in SSA for the period 1990-2008 using a panel co- integration approach.
A sample of 25, 15, 19 and 15 countries from the region were taken to analyze the determinants of
exports of food, agricultural raw material s, minerals and energy (as defined under the SITC)
respectively.
For the first three commodity groups the real value of exports is specified in a semi-log linear form as
a function of the relative export price (unit export price of a commodity per its world price), the
international value of a commodity relative to its domestic value, the weighted average income of
importers, real effective exchange rates, world interest rate, gross domestic investment and foreign
direct investment. On the other hand, the real value of export of energy is specified in a log linear
form as a function of world export price of energy relative to world prices and gross world income
(with the assumption of constant supplies). The long run relationships were estimated using OOLS
which accounts for serial correlations and problem of endogeneity. The results demonstrated the
inastic nature of the elastic ties of exports of the three commodity groups while elastic price
(relative) and income elastic ties were found for energy exports. Moreover, the supply side factors
and the macroeconomic policies pursued by importers are found to be among the important
determinants of exports of primary commodities in SSA.
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Keywords
Commodities in Sub Saharan, The Determinants of Export of Primary Africa