Foreign Trade, Employment and Economic Growth in Sudan: Econometric Analysis

Abstract

This study investigates the relationships between foreign trade, employment and economic growth in Sudan over the period 1970-2017, with inflation and budget deficit as policy variables. Two autoregressive distributed lags (ARDL) models were estimated with trade and economic growth as determinants of youth employment and total employment. Two other models were estimated to investigate how trade and each type of employment affect economic growth separately. The empirical results from the four models revealed existence of long run relationships between foreign trade, employment and economic growth. In the short run, trade, economic and population growth rates have stronger effects on youth employment than on total employment. In the long run, youth employment is found to be positively affected by economic growth and investment but negatively affected by population growth and the budget deficit, while total employment is only affected by population growth rate. Economic growth is found to be much explained by youth employment than by total employment and foreign trade. The study concludes that the internal factors in terms of inflation, budget deficit, investment and salaried workers are more important to employment and economic growth than the performance of foreign trade sector of Sudan. The policy implication is that youth employment should be given priority in labor and trade openness policy than targeting employment as a whole. For trade openness to play positive roles on employment and economic growth in Sudan, corrective policies for volumes and types of exports and imports are urgently needed.