Trade uncertainty in US and China on trade openness in Sub-Saharan Africa

ABSTRACT

This study applies the system GMM technique to determine the impact of external trade uncertainty on trade openness for 35 countries in Sub-Saharan Africa, over the period 1985–2019 with 5-year non-overlapping data. Given the rapid globalisation and episodes of global economic uncertainty over the recent years, the research attempts to identify if trade uncertainty from outside of the region could affect trade openness in the region. There is strong evidence of a negative impact of trade uncertainty from both China, the US and the world on trade in Sub-Saharan Africa. The negative impact is, however, more severe from the world and followed by China. Comparatively, it can be concluded that China is more influential on Africa’s trade as compared to the US. It is, therefore, recommended that African economies should be concerned with trade uncertainty from around the world and put in place some measures to safeguard their economies.

KEYWORDS:

• Trade uncertainty
• trade openness
• US
• China
• Sub-Saharan Africa

JEL CLASSIFICATION:

• F1

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The dataset for World Trade Uncertainty Index and the index by country (i.e. China and the US) used in this study is based on Economist Intelligence Unit (EIU) report which was recently constructed by Ahir, Bloom, and Furceri (2018). The dataset was based on their World Uncertainty Index and is found on their website https://www.policyuncertainty.com/. Trade openness as measured by total exports and imports of products as a share of GDP, the consumer price index with 2010 as the base year used to represent inflation, real GDP (constant 2010 US$), domestic credit to private sector by banks (% of GDP), population (total), foreign direct investment net inflows (% of GDP) and gross fixed capital formation (% of GDP) are all obtained from World Development Indicators database https://data.worldbank.org/indicator/. Property rights (PR) was sourced from Freedom House Database here https://freedomhouse.org/report/freedom-world.

Notes

1. The uncertainty dataset is found here https://www.policyuncertainty.com/

2. Property rights (PR) was sourced from Freedom House Database here https://freedomhouse.org/report/freedom-world.

3. https://data.worldbank.org/indicator/