The exchange rate, income, trade openness and the trade balance: longitudinal panel analysis for selected SSA countries

Adamu Braimah Abille, Oytun Meçik
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Abstract

Purpose Motivated by recent rapid exchange rate depreciations, shrank economic growth, high inflation, and persistent trade deficits, this study examines the trade balance (TB) in the face of the recent dynamics of the stated macroeconomic factors, which are also important determinants of the TB. The symmetric test of the J-curve phenomenon for the selected Sub-Saharan African (SSA) countries is revisited in this regard. The study uses panel data from 1970 to 2020 for ten of these countries for the longitudinal panel analysis with the TB as the dependent variable and the real exchange rate, foreign and domestic national incomes, and trade openness as the set of independent variables.Design/methodology/approach Because the underlying data set involves a heterogeneous panel of relatively short N and long T, the pooled mean group (PMG) and mean group (MG) heterogeneous panel models are employed based on the Hausman test for parameter consistency in heterogeneous panels.Findings The findings largely support the domestic income growth– TB worsening and the foreign income growth– TB improvement hypotheses. Trade openness is found to mostly augment the TB performance of the countries. The results also validated the J-curve effect for only 3/10 and 2/10 countries in the PMG and MG models, respectively. The divergence for most of the countries is attributed to possible import compression and institutional structure of SSA countries.Practical implications Given the favorable effects of trade openness on the TB performance of SSA countries, it is recommended that SSA countries place much emphasis on import-substitution industrialization and value addition to their natural resources as well as investment-driven growth policies to improve the competitiveness of their exports and reverse the chronic deficits in their TBs.Originality/value This paper is unique for invoking heterogeneous panel models to analyze the TB in light of recent dynamics of its determinants, as well as providing an update on the symmetric test of the J-curve phenomenon for the selected SSA countries.
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汇率、收入、贸易开放度和贸易平衡:选定SSA国家的纵向面板分析
在近期汇率快速贬值、经济增长萎缩、高通胀和持续贸易逆差的推动下,本研究考察了近期宏观经济因素动态下的贸易平衡(TB),这些因素也是TB的重要决定因素。在这方面,对选定的撒哈拉以南非洲(SSA)国家的j曲线现象的对称检验进行了重新审视。该研究使用了其中10个国家1970年至2020年的面板数据进行纵向面板分析,以结核病为因变量,实际汇率、国内外国民收入和贸易开放度为自变量。由于底层数据集涉及相对较短的N和较长的T的异质性面板,因此基于异质性面板中参数一致性的Hausman检验,采用了混合平均组(PMG)和平均组(MG)异质性面板模型。研究结果在很大程度上支持了国内收入增长-结核病恶化和国外收入增长-结核病改善的假设。研究发现,贸易开放在很大程度上提高了各国的结核病防治绩效。在PMG和MG模型中,j曲线效应分别只适用于3/10和2/10的国家。大多数国家的差异归因于可能的进口压缩和SSA国家的制度结构。鉴于贸易开放对SSA国家结核病绩效的有利影响,建议SSA国家将重点放在进口替代工业化和自然资源增值以及投资驱动的增长政策上,以提高其出口竞争力并扭转其结核病的长期赤字。本文的独特之处在于,根据其决定因素的最新动态,调用异质面板模型来分析结核病,并对选定的SSA国家的j曲线现象的对称检验提供了更新。
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审稿时长
8 weeks
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