Trade liberalisation, economic growth and poverty level in sub-Saharan Africa (SSA)

Abstract

This paper explores the relationship among trade openness, economic growth and poverty level in 40 sub-Saharan Africa countries from 1990 to 2017. Panel Autoregressive Distributed Lag (ARDL) model, Panel Vector Auto-regression (VAR) and the System of Generalised Method of Moments (SYS-GMM) were employed. A robustness test was also applied. The sensitivity analysis was done through the Panel ARDL model. The results revealed that trade openness, foreign direct investment and institutional quality significantly increase economic growth in the long term, while institutional quality reduces economic growth in the short run. Furthermore, trade liberalisation, institutional quality and population growth rate lead to poverty reduction in the long run, while trade openness has adverse effects in the short run. Moreover, poverty does not have a significant response to trade and growth shocks. Poverty presented a positive change but the level was not significant. The Pairwise Dumitrescu Hurlin Panel Causality results highlight feedback effects among trade, economic growth and poverty level in the region. Based on these findings, the study recommends that governments in Africa should reviewed their poverty reduction programmes in order to move towards achieving the sustainable development goals.