Impact of Persistent Trade Deficit on Economic Growth: Evidence from Four Africa Regions

Author(s)

Ernest Kay Bakpa , Hu Xuhua (PhD Professor) ,

Download Full PDF Pages: 18-30 | Views: 466 | Downloads: 126 | DOI: 10.5281/zenodo.5592729

Volume 10 - September 2021 (09)

Abstract

This paper examines the impact of chronic and persistent trade deficit on economic growth in Africa for the period between 1980 and 2017. In this study, the data from the world bank database covered four regions of Africa namely; Central Africa, East Africa, North Africa, and West Africa.  Generalized Method of Moment (GMM) estimator, Random Effect Model (RE) and Generalized Linear Model (GLM) was adopted in analyzing the data. Results from the study show that the trade deficit is caused by high inflation rate and low export production. Also, the result indicates that the unstable exchange rate is one of the main causes of the trade deficit in these regions. The paper, therefore, recommends that inflation rate should be reduced to a level that can induce trade balance and reduce the high pricing of goods. Further, there should be proper allocation of resources to the export production sectors.   

Keywords

Economic Growth, Trade deficit, Inflation, Exchange rate

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Cite this Article:

Ernest Kay Bakpa , Impact of Persistent Trade Deficit on Economic Growth: Evidence from Four Africa Regions, American Based Research Journal 09(2021):18-30 DOI: 10.5281/zenodo.5592729