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Trade Regimes, Liberalization and Macroeconomic Instability in Africa

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Author Info
Chantal Dupasquier (UN Economic Commission for Africa, Addis Ababa, Ethiopia)
Patrick N. Osakwe (UN Economic Commission for Africa, Addis Ababa, Ethiopia)

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Abstract

Trade policy has been a very contentious issue in the discourse on African development. Using panel data for 33 African countries spanning the period 1986-2000, we examine the relationship between trade liberalization and macroeconomic instability in Africa. We focus on instabilities in output, consumption and investment, and use both single and system estimation techniques as well as different measures of trade regimes. After controlling for key potential sources of macroeconomic instability, we find no substantial evidence that trade liberalization has a systematic impact on instability in the region. The study shows that the volatilities of inflation and the terms of trade, as well as climatic disasters, the nature of fiscal policy, and the severity of debt are more robust determinants of macroeconomic instability in the region. The paper also argues that policymakers in the region can reduce macroeconomic instability and vulnerability to shocks by diversifying their export structures, using fiscal policy in a countercyclical manner, and improving the functioning of the financial sector.

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Publisher Info
Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0604.

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Length: 29 pages
Date of creation: Jan 2006
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Handle: RePEc:sca:scaewp:0604

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Related research
Keywords: instability; openness; trade regime; Africa; macroeconomic; panel data;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Osakwe, Patrick N., 2006. "Emerging Issues and Concerns of African Countries in the WTO Negotiations on Agriculture and the Doha Round," MPRA Paper 1850, University Library of Munich, Germany. [Downloadable!]
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