Essays on trade integration in Sub-Saharan Africa

Ph.D. (Economics)Abstract: This study assesses the importance of regional integration in Sub-Saharan Africa by addressing four research questions. Firstly, the effectiveness of the policies adopted by African countries to foster trade integration. Secondly the magnitude of vulnerability of the business cycle between African countries and their main trade partners. Thirdly the magnitude of trade linkages amongst African countries and lastly the importance of trade openness for economic growth in Africa. We applied different econometrics model in the African context: The Instrumental Variables Panel Smooth Transition Regression (IVPSTR) was applied first. This model addresses several issues arising in the relationship between trade openness and economic growth in Africa: the potential non-linearity and the endogeneity problem. When this model was applied (Chapter Two), we used unbalanced data of 38 African countries over the period 1970 to 2014 and we split African countries into three groupings according to their stage of development. In the same chapter, we report on the use of a gravity model based on the monopolistic competition to analyse the border effect on intra-African trade. The magnitude of border effect helps to characterise the extent of market fragmentation and also to determine whether the strategies adopted by African economies to boost trade integration are effective or not. Annual data over the period 1980 to 2006 of 26 manufactured industries of 41 African countries was utilised. In chapters three and four, we set out use the global vector autoregressive model (GVAR). In the fourth chapter, we use the GVAR to investigate the extent of business cycle synchronisation and shock transmission between Africa, China, Europe and United Stated over the period 1980 to 2012Q4. The final chapter sets out the use of the GVAR model to explore the trade linkages among African economies belonging to the same sub-region over the period 1980Q1 to 2012Q4, because countries belonging to the same regional economic community are expected to have strong trade linkages. The study found that the link between trade openness and economic growth in Africa depends upon the stage of development of countries (Chapter 2). In addition, the data revealed that the level of investment also affects the relationship between trade openness and growth. While no significant relationship between trade and growth was found for low-income countries; for middle- and upper-income African countries, there is a significant relationship between openness and growth, but this relationship depends upon the level of their investment. The results were consistent and robust, even when alternative measurements of trade openness were used. In the third chapter, we write that while market fragmentation is very high in Africa, Southern Africa development community (SADC)..