Economic growth, export and external debt causality: the case of African countries

Abstract

Empirical investigation of the export-driven economic growth hypothesis has provided mixed results in a bivariate causality framework. The problem with such bivariate causality analysis is that there can be an omitted variable which could adversely affect the results. This paper looks at the trivariate causality analysis of African countries by introducing external deby servicing as a third variable in the export-economic growth analysis. The results indicate that there is a feedback or bidirectional causality between external debt servicing, economic growth and exports. Evidence of the 1983–90 subperiod is consistent with the argument that the structural adjustment programmes which were designed to remove economic distortions, promote exports and encourage external debt management, increased growth in the countries involved.