Date of Award

2012

Document Type

Thesis

Degree Name

Master of Science (MS)

Department

Agricultural Economics

First Advisor

Yeboah, Osei-Agyeman Dr.

Abstract

The main objective of this study was to measure the effects of trade liberalization on the economic growth of African countries. A modified Cobb-Douglas production function as in Miller & Upadhyay (2000) was employed to determine the impact of trade factors on Gross Domestic Product (GDP) as well as the determining Returns to Scale (RTS) of the individual economies. The factors include Foreign Direct Investment (FDI), exchange rate, capital-labor ratio, and trade openness. Trade openness was computed as the ratio of total of imports and exports to total exports. Alternative panel models including the One-Way Fixed/Random Effects models and the Two-Way Fixed/Random Effects model were developed using time series and cross-sectional data from1980 to 2008. Based on the results from the summary statistics for all panel models, the Two-Way Random effects model was selected using the mean square error, root mean square error and the results from the Hausman test as selection criteria. The results show that trade openness has a positive effect on GDP growth. The only trade factor that was also found to significantly impact the GDP growth was Exchange rate. These results are comparable to those reported in the literature. The results of the Two-Way Random Effects model provided an average economic growth rate of 0.60 % for the continent. Ghana, South Africa and Botswana were the only countries that exhibited increasing Returns to Scale (RTS) greater than 1.0 while Guinea Bissau recorded no growth.

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