Högskolan i Skövde

Abstract

The main objective of our paper is to investigate whether expansion in exports can lead to improve economic growth of Sub-Saharan African countries for the period 1970-2006. Four macro economic indicators (real GDP, Trade balance, Government expenditure and

Investment) are used in our model to carry out our analysis concerning Sub Saharan African countries.

Time series techniques such as unit root test (Augmented Dickey Fuller test) and co integration test (Johansen’s procedure) are used to find out whether there is a long run relationship between economic growth and trade balance.

The results of the unit root test indicate that all series are stationary after first difference, with I (1). Johansen’s co integration test showed that co integration (long run relationship) exists between GDP and Trade balance, as we got significant eigenvalues and found co integration between all of the four variables which shows that they are co integrated with each other and indicates a long run relationship.

Our results indicate that for the time period of 1970 to 2006, Sub Saharan African countries experienced a simultaneous increase in economic growth and trade balance as well as in investment and Govt expenditure.

Key words: exports, economic growth, unit root, co integration, Sub-Saharan Africa