Trade in Services-Economic Growth Nexus: An Analysis of the Growth Impact of Trade in Services in SADC Countries
Keywords:
Trade in Services, Economic Growth, SADC, Gross Domestic Product, Service Exports, Imports.
Abstract
The article analysed the trade in services led growth in ten selected countries in the Southern African Development Community region using econometric regression models. Panel data obtained from the World Bank and United Nations Conference on Trade and Development databases for the period 1992 to 2015 was analysed. Five variables were used in the econometric analysis. The marginal effects of service and goods exports were positive while those of goods and service imports were negative and highly significant as was expected from literature. Service exports registered an impact that was almost threefold that of service imports and greater than goods exports. Policy-makers are encouraged to, clearly define their trade in service strategy and reduce or remove trade restrictions. The study is of importance to researchers, the private sector and government policymakers.
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References
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Asfaw, H. A. (2014). Trade policy and economic growth in Sub- Saharan Africa: A panel data approach,†American Journal of Trade and Policy, 1, 94–101.
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Choi, I. (2001). Unit root tests for panel data, Journal of International Money and Finance, 20, 249–272.
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Dihel, N. & Goswami, A. G. (2016). From Hair Stylists and Teachers to Accountants and Doctors: The Unexplored Potential of Trade in Services in Africa, Washington, D.C.: World Bank Group.
El Khoury, A. C. & Savvides, A. (2006). Openness in services trade and economic growth, Economics Letters, 92, 277-283.
Fenira, M. (2015). Trade openness and growth in developing countries: An analysis of the relationship after comparing trade indicators, Asian Economic and Financial Review, 5, 468–482.
Financial Sector in Economic Growth: Time Series Evidence from LDCs, Journal of Development Economics, 50(1), 119-46.
Fosu, A. K. (1990). Exports and economic growth: the African Case, World Development, 18(6), 831-35.
Goldsmith, R. W. (1969). Financial Structure and Development, New Haven, CT: Yale U. Press.
Hadri, K. (2000). Testing for stationarity in heterogeneous panel data, Econometrics Journal, 3, 148–161.
Hoekman, B. & Shepherd, B. (2017). Services Productivity, Trade Policy and Manufacturing Exports," World Economy, 40(3), 499-516.
Hoekman, B. & te Velde, D. W. (eds.) (2017). Trade in services and economic transformation: A new development policy priority, London: ODI. (http://set.odi.org).
Hsiao, C. (2003). Analysis of Panel Data, Cambridge University Press, Cambridge.
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Jung, W. S. (1986). Financial Development and Economic Growth: International Evidence, Economic Development and Cultural Change, 34(2), 336-346.
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Kónya, L. (2004). Export-led growth, growth-driven export, both or none? Granger causality analysis on OECD countries, Applied Econometrics and International Development, AEEADE, 4(1), 73-94.
Kowalski, P., Lopez Gonzalez, J., Ragoussis, A. & Ugarte, C. (2015). Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies, OECD Trade Policy Papers, No. 179, Paris: OECD Publishing.
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Medina-Smith, E. J. (2001). Is the export-led growth hypothesis valid for developing countries? A case study of Costa Rica, Policy issues in International Trade and Commodities Study series No. 7: Geneva, United Nations.
Moulton, B. R. (1986). Random group effects and the precision of regression estimates, Journal of Econometrics, 32, 385–397.
Moulton, B. R. (1987). Diagnostics for group effects in regression analysis, Journal of Business and Economic Statistics, V5, 275–282.
Musila, J. W. & Yiheyis, Z. (2015). The impact of trade openness on growth: The case of Kenya, Journal of Policy Modeling, 37, 342–354.
Odedokun, M. O. (1996). Alternative Econometric Approaches for Analysing the Role.
OECD. & WTO. (2015). Aid for Trade at a Glance 2015: Reducing Trade Costs for Inclusive, Sustainable Growth, Geneva: World Trade Organisation.
OECD. & WTO. (2017). Aid for Trade at a glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development,†Geneva: World Trade Organisation.
Pazim, K. H. (2009). Panel data analysis of export-led growth hypothesis in BIMP-EAGA Countries: University Library of Munich, Germany.
Polat, A., Shahbaz, M., Rehman, I. U. & Satti, S. L. (2015). Revisiting linkages between financial development, trade openness and economic growth in South Africa: Fresh evidence from combined cointegration test, Quality and Quantity, 49, 785–803.
Rigobon, R. & Rodrik, D. (2005). Rule of law, democracy, openness, and income: Estimating the interrelationships, The Economics of Transition, 13, 533–564.
Sáez, S., Mckenna, M. & Hoffman, B. (2015). Valuing Trade in Services in Africa, The Africa Competitiveness Report 2015, Washington, D.C.: World Bank Group.
Sakyi, D., Commodore, R. & Opoku, E. E. (2015). Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation, Journal of African Business, 16(1-2), 1-15.
Sakyi, D., Villaverde, J. & Maza, A. (2015). Trade openness, income levels, and economic growth: The case of developing countries, 1970–2009, The Journal of International Trade & Economic Development, 24, 860– 882.
Sang-Chul, Y. (2017). Trade Openness and Economic Growth: A Panel data Analysis of Asian Countries, 무ì—보험연구 ì œ18권 ì œ3호, 9, 1-19.
Tekin, R. B. (2012). Development aid, openness to trade and economic growth in least developed countries: Bootstrap panel granger causality analysis, Procedia-Social and Behavioral Sciences, 62, 716–721.
Trejos, S. & Barboza, B. (2015). Dynamic estimation of the relationship between trade openness and output growth in Asia, J. Asian Econ. 36, 110–125.
Ukpolo, V. (1994). Export Composition and growth of selected low-income African countries: evidence from time-series data, Applied Economics, 26, 445-449.
UNCTAD. (2015a). Unlocking the potential of Africa’s services trade for Growth and development, Economic Development in Africa Report, UN, NY.
UNCTAD. (2015b). World Investment Report: Reforming International Investment Governance, Geneva: United Nations.
UNCTAD. (2016). World Investment Report: Investor Nationality: Policy Challenges, Geneva: United Nations.
UNCTAD. (2017a). The role of the services economy and trade in structural transformation and inclusive development, Geneva: United Nations.
UNCTAD. (2017b). World Investment Report: Investment and the Digital Economy, Geneva: United Nations.
United Nations Economic Commission for Africa. (2015). Economic Report on Africa 2015: Industrializing through trade, United Nations, Addis Ababa, Ethiopia.
USITC (United States International Trade Commission). (2015). Factors contributing to the rapid growth of Mauritius’ services economy, USITC Executive Briefing on Trade, July.
Vercellis, C. (2009). Business Intelligence: Data Mining and Optimization for Decision making, United Kingdom: Wiley & Sons Ltd.
Were, M. (2015). Differential effects of trade on economic growth and investment: A cross-country empirical investigation, Journal of African Trade, 2, 71–85.
World Bank. (1993). The East Asian Miracle: Economic Growth and Public Policy: New York, Oxford University Press.
Ajmi, A. N., Ayeb, G. C., Balcilarc, M. & Guptad, R. (2013). Causality between Exports and Economic Growth in South Africa: Evidence from Linear and Nonlinear Tests, Working Paper Series, University of Pretoria Department of Economics.
Asfaw, H. A. (2014). Trade policy and economic growth in Sub- Saharan Africa: A panel data approach,†American Journal of Trade and Policy, 1, 94–101.
Borchert, I., Gootiiz, B. & Mattoo, A. (2012). Policy Barriers to International Trade in Services: Evidence from a New Database, Policy Research Working Paper No. 6109, Washington, DC: World Bank.
Brooks, C. (2008). Introductory Econometrics for Finance, 2nd ed., New York: Cambridge University Press.
Brueckner, M. & Lederman, D. (2015). Trade openness and economic growth: Panel data evidence from Sub-Saharan Africa, Economica, 82, 1302–1323.
Centre for International Economics. (2010). Quantifying the benefits of services trade liberalization, Report prepared for Department of Foreign Affairs and Trade, Canberra: Australia. www.TheCIE.com.au.
Chia, Y. E. (2016). Export-Led Growth Hypothesis: Empirical Evidence from Selected sub-Saharan African Countries, Procedia Economics and Finance, 35, 232–240.
Choi, I. (2001). Unit root tests for panel data, Journal of International Money and Finance, 20, 249–272.
Dash, R. K. & Parida, P. C. (2013). FDI, services trade and economic growth in India: empirical evidence on causal links, Empir Econ, 45, 217–238.
Dihel, N. & Goswami, A. G. (2016). From Hair Stylists and Teachers to Accountants and Doctors: The Unexplored Potential of Trade in Services in Africa, Washington, D.C.: World Bank Group.
El Khoury, A. C. & Savvides, A. (2006). Openness in services trade and economic growth, Economics Letters, 92, 277-283.
Fenira, M. (2015). Trade openness and growth in developing countries: An analysis of the relationship after comparing trade indicators, Asian Economic and Financial Review, 5, 468–482.
Financial Sector in Economic Growth: Time Series Evidence from LDCs, Journal of Development Economics, 50(1), 119-46.
Fosu, A. K. (1990). Exports and economic growth: the African Case, World Development, 18(6), 831-35.
Goldsmith, R. W. (1969). Financial Structure and Development, New Haven, CT: Yale U. Press.
Hadri, K. (2000). Testing for stationarity in heterogeneous panel data, Econometrics Journal, 3, 148–161.
Hoekman, B. & Shepherd, B. (2017). Services Productivity, Trade Policy and Manufacturing Exports," World Economy, 40(3), 499-516.
Hoekman, B. & te Velde, D. W. (eds.) (2017). Trade in services and economic transformation: A new development policy priority, London: ODI. (http://set.odi.org).
Hsiao, C. (2003). Analysis of Panel Data, Cambridge University Press, Cambridge.
International Monetary Fund, World Bank, and World Trade Organization. (2017). Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment, Geneva: World Trade Organisation.
Jung, W. S. (1986). Financial Development and Economic Growth: International Evidence, Economic Development and Cultural Change, 34(2), 336-346.
Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire, Cogent Economics & Finance, 5, 1-14.
Klevmarken, N. A. (1989). Panel studies: What can we learn from them? Introduction, European Economic Review, 33, 523–529.
Kónya, L. (2004). Export-led growth, growth-driven export, both or none? Granger causality analysis on OECD countries, Applied Econometrics and International Development, AEEADE, 4(1), 73-94.
Kowalski, P., Lopez Gonzalez, J., Ragoussis, A. & Ugarte, C. (2015). Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies, OECD Trade Policy Papers, No. 179, Paris: OECD Publishing.
Kuhn, T. S. (1962). The Structure of Scientific Revolutions, Chicago, University of Chicago Press.
Lawal, A. I., Nwanji, T. I., Asaleye, A. & Ahmed, V. (2016). Economic growth, financial development and trade openness in Nigeria: An application of the ARDL bound testing approach, Cogent Economics and Finance, 4, 1–15.
Lee, C. & Huang, D. (2002). Human Capital Distribution, Growth and Trade, Bulletin of Economic Research and John Wiley & Sons Ltd, 66(1), 1467-8586.
Loungani, P., Mishra, S., Papageorgiou, C. & Wang, K. (2017a). The Future Wealth of Nations: World Trade in Services, IMF Research Bulletin, 18(1), 4-7.
Loungani, P., Mishra, S., Papageorgiou, C. & Wang, K. (2017b). World Trade in Services: Evidence from a New Dataset, World Trade in Services, 1-41.
Maune, A. (2017). Trade in services and economic benefits in Africa: Evidence from Zimbabwe. Paper presented at the International Conference on Financial Services, Western Cape, South Africa.
Medina-Smith, E. J. (2001). Is the export-led growth hypothesis valid for developing countries? A case study of Costa Rica, Policy issues in International Trade and Commodities Study series No. 7: Geneva, United Nations.
Moulton, B. R. (1986). Random group effects and the precision of regression estimates, Journal of Econometrics, 32, 385–397.
Moulton, B. R. (1987). Diagnostics for group effects in regression analysis, Journal of Business and Economic Statistics, V5, 275–282.
Musila, J. W. & Yiheyis, Z. (2015). The impact of trade openness on growth: The case of Kenya, Journal of Policy Modeling, 37, 342–354.
Odedokun, M. O. (1996). Alternative Econometric Approaches for Analysing the Role.
OECD. & WTO. (2015). Aid for Trade at a Glance 2015: Reducing Trade Costs for Inclusive, Sustainable Growth, Geneva: World Trade Organisation.
OECD. & WTO. (2017). Aid for Trade at a glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development,†Geneva: World Trade Organisation.
Pazim, K. H. (2009). Panel data analysis of export-led growth hypothesis in BIMP-EAGA Countries: University Library of Munich, Germany.
Polat, A., Shahbaz, M., Rehman, I. U. & Satti, S. L. (2015). Revisiting linkages between financial development, trade openness and economic growth in South Africa: Fresh evidence from combined cointegration test, Quality and Quantity, 49, 785–803.
Rigobon, R. & Rodrik, D. (2005). Rule of law, democracy, openness, and income: Estimating the interrelationships, The Economics of Transition, 13, 533–564.
Sáez, S., Mckenna, M. & Hoffman, B. (2015). Valuing Trade in Services in Africa, The Africa Competitiveness Report 2015, Washington, D.C.: World Bank Group.
Sakyi, D., Commodore, R. & Opoku, E. E. (2015). Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation, Journal of African Business, 16(1-2), 1-15.
Sakyi, D., Villaverde, J. & Maza, A. (2015). Trade openness, income levels, and economic growth: The case of developing countries, 1970–2009, The Journal of International Trade & Economic Development, 24, 860– 882.
Sang-Chul, Y. (2017). Trade Openness and Economic Growth: A Panel data Analysis of Asian Countries, 무ì—보험연구 ì œ18권 ì œ3호, 9, 1-19.
Tekin, R. B. (2012). Development aid, openness to trade and economic growth in least developed countries: Bootstrap panel granger causality analysis, Procedia-Social and Behavioral Sciences, 62, 716–721.
Trejos, S. & Barboza, B. (2015). Dynamic estimation of the relationship between trade openness and output growth in Asia, J. Asian Econ. 36, 110–125.
Ukpolo, V. (1994). Export Composition and growth of selected low-income African countries: evidence from time-series data, Applied Economics, 26, 445-449.
UNCTAD. (2015a). Unlocking the potential of Africa’s services trade for Growth and development, Economic Development in Africa Report, UN, NY.
UNCTAD. (2015b). World Investment Report: Reforming International Investment Governance, Geneva: United Nations.
UNCTAD. (2016). World Investment Report: Investor Nationality: Policy Challenges, Geneva: United Nations.
UNCTAD. (2017a). The role of the services economy and trade in structural transformation and inclusive development, Geneva: United Nations.
UNCTAD. (2017b). World Investment Report: Investment and the Digital Economy, Geneva: United Nations.
United Nations Economic Commission for Africa. (2015). Economic Report on Africa 2015: Industrializing through trade, United Nations, Addis Ababa, Ethiopia.
USITC (United States International Trade Commission). (2015). Factors contributing to the rapid growth of Mauritius’ services economy, USITC Executive Briefing on Trade, July.
Vercellis, C. (2009). Business Intelligence: Data Mining and Optimization for Decision making, United Kingdom: Wiley & Sons Ltd.
Were, M. (2015). Differential effects of trade on economic growth and investment: A cross-country empirical investigation, Journal of African Trade, 2, 71–85.
World Bank. (1993). The East Asian Miracle: Economic Growth and Public Policy: New York, Oxford University Press.
Published
2019-05-13
How to Cite
Maune, A. (2019). Trade in Services-Economic Growth Nexus: An Analysis of the Growth Impact of Trade in Services in SADC Countries. Journal of Economics and Behavioral Studies, 11(2(J), 58-78. https://doi.org/10.22610/jebs.v11i2(J).2819
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Research Paper
Copyright (c) 2019 Alexander Maune
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