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Aggregate Trade Response to Economy-Wide Distortions in Sub-Saharan Africa

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  • Ghura, Dhaneshwar
  • Grennes, Thomas

Abstract

The effects of economy-wide distortions on economic performance have received close attention in the empirical literature for developing countries. This paper extends the analysis to investigate the effects of these distortions on aggregate trade in Sub-Saharan Africa. Using pooled time-series and cross-section data for 33 countries in the region during 1970-87, it is established that overvalued real exchange rates were common, that they functioned as a tax on aggregate export supply and that they stimulated import demand. Also, aggregate export supply is found to be price inelastic. The Marshall-Lerner condition is met for the sample of countries considered. It is also established that African trade responds significantly to external factors, including international prices and world income. Also, the behaviour of the real exchange rate in Sub-Saharan Africa is consistent with the predictions of theoretical models. Copyright 1994 by Oxford University Press.

Suggested Citation

  • Ghura, Dhaneshwar & Grennes, Thomas, 1994. "Aggregate Trade Response to Economy-Wide Distortions in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 3(3), pages 359-386, December.
    • Handle: RePEc:oup:jafrec:v:3:y:1994:i:3:p:359-86
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    Cited by:

    1. Victalice Ngimanang ACHAMOH & Francis Menjo BAYE, 2015. "Examination of the effects of public spending and trade policy on real exchange rate in Cameroon," EuroEconomica, Danubius University of Galati, issue 2(34), pages 115-128, November.
    2. Victalice Ngimanang Achamoh & Francis Menjo Baye, 2016. "Implications Of Foreign Direct Investment, Financial Development And Real Exchange Rate For Economic Growth In Cameroon," EuroEconomica, Danubius University of Galati, issue 1(35), pages 149-163, may.

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