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Trade Regimes, Liberalization and Macroeconomic Instability in Africa

Author

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  • Chantal Dupasquier

    (UN Economic Commission for Africa)

  • Patrick N. Osakwe

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.

Suggested Citation

  • Chantal Dupasquier & Patrick N. Osakwe, 2006. "Trade Regimes, Liberalization and Macroeconomic Instability in Africa," Development Economics Working Papers 21823, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:develo:21823
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    References listed on IDEAS

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    Cited by:

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    2. Ahmed, Abdullahi D. & Suardi, Sandy, 2009. "Macroeconomic Volatility, Trade and Financial Liberalization in Africa," World Development, Elsevier, vol. 37(10), pages 1623-1636, October.

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    More about this item

    Keywords

    instability; openness; trade regime; Africa; Macroeconomic; panel data;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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