Liberalization Globalization and Economic Growth in Sub-Saharan Africa
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Date
2005-06
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A.A.U
Abstract
In this study attempts has been made to examme the relationships and impact of the key
liberalizations and/or globalization variables in economic growth in Sub-Saharan Africa (SSA).
Using panel data, this paper essentially explores the effects of openness to international trade and
foreign direct investment (FOI) on economic growth. Given the data and objectives of this study,
we used Fixed Effect after testing for long-run relationship using panel co-integration test on
variables under consideration. In the due process, there are two analyses were undertaken. First,
the time series properties of the variables were ascertained by using the Hadri Panel data unit
root test procedure. The results indicate that some of the key variables are J(l). Then, the results
from Larson and Johansen panel co-integrating procedw-es indicates that there is no need to use
Error Correction Mechanism (ECM) rather it is appropriate to use the OLS estimation techniques
of Fixed-Effect or Random-Effect Model. The specification test which we used, Hauseman test,
favored the Fixed-Effect Model based on our data
Almost all the estimation results showed that openness to Foreign Direct Investments (FOI) has
positive and significant impact while openness to international trade is insignificant and often
negatively affect growth of low-income countries of Sub-Saharan African. The results indicate
that openness benefits the high-income group than the low-income group in SSA.
Therefore, policy measw-es, which aIm to bring economic growth through liberalization and
integration, need to go beyond openness to international trade. It is worth for SSA countries
individually and collectively to creating an enabling environment for investment, enhances the
volume of trade at the regional and international levels to increase their level of income. They
need to take measures in the areas of improving their human capital development (education or
adult literacy etc), industrial value creation and financial deepening.
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Keywords
Liberalization, Globalization and Economic Growth