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Author
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Muchechemera, Hillary
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Title
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The Impact of international trade on economic growth in Southern African Development Community (1995-2022)
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Abstract
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The research examined the impact of International trade on economic growth in Southern Africa Development Community. Empirically. This study aimed at analysing the relationship that exist between trade and economic growth in SADC. Descriptive summary statistics for panel data covering 10 SADC member states from 1990-2022 was employed. The fixed effects model and the random effects model was used to interpret the results in the study. The Hausman test was deployed to determine the appropriate model that should be used to interpret the outcomes of the study, between Random and Fixed effects models in determining the relationship between International trade and economic growth indicated. The study included data from the World Development Indicators (WDI) related to, trade as a percentage of GDP Foreign Direct Investment (FDI), Government Expenditure, Unemployment, and inflation as control variables. E-Views 10 economics statistical package was used to regress the model. Findings from the reveals that trade has a positive effect on GDP pc growth, with a coefficient of 0.017, implying that a one percent increase in trade increases GDP pc by 0.017%, theoretically, exchanging goods and services that comprises of capital goods, and resources between countries significantly contribute to growth in GDP per person, in Southern Africa Development Community (SADC). The findings also indicate a positive association on Foreign Direct Investment (FDI) and GDP pc growth, suggesting that a conducive investment environment and foreign investments that comes through international trade from abroad into the region have a high positive impact or explanatory power on economic growth which can also improve the competitiveness of goods and services promoting greater export earnings for the SADC region. Inflation has also been noted to have a negative effect in its correlation with GDP per person growth, this affects the exchange rate making exports more expensive in the global markets. Government expenditure is shown to have a significant negative impact on the association between international trade and GDP pc growth. This suggest that increased government expenditure on consumption can lead to higher imports, potentially worsening the trade balance this negatively affect economic growth, having a catastrophic negative balance of trade which might kill investor confidence which is a disaster to the labour market, crowding out effect, trade tensions notably affect growth of the SADC economy. The positive impact of unemployment and its relationship to economic growth is also observed, which is counterintuitive Based on these findings policymakers should actively support and participate in regional free trade agreements, for example the African Continental Free Trade Area (AfCFTA) this agreement advocates for the relaxation of tariffs among member countries and covering trade facilitation and services, which can enhance intra-regional trade, economic integration within SADC, and address trade barriers and avoid further ruptures in the global trade system. This includes implementing policy actions to facilitate trade and reduce barriers to international trade, promoting access to new markets.
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Date
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June 2024
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Publisher
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BUSE
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Keywords
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International trade
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Economic growth
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Supervisor
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Dr. Kairiza
