[Estimation of Imports Demand Model for Sub-Saharan Africa]

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ABSTRACT

The aim of this article is to contribute to the understanding of the import substitution process in Sub-Saharan. Industrialization in Sub-Saharan Africa occurred in two phases: the initial and incipient stage began around the 1920s, while the region was still under colonial rule, and ended in the late forties; the second one began in the late fifties and gained momentum in the sixties, when import substitution was implemented more widely. Although these countries were the last ones to embark on the strategy of import substitution, they followed the steps of Latin American countries, but due to stronger structural domestic constraints and external restrictions, the import substitution policy soon failed, having a major impact on these economies.

Key-words: Sub-Saharan Africa; Import Substitution; Industrialization

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION6

CHAPTER 2: LITERATURE REVIEW10

2.1 Neoclassical trade theory10

2.2 The Keynesian Framework11

2.3 Initial Stage of the Industrialization14

2.4 Second Stage of Industrialization20

CHAPTER 3: DATA AND METHODLOGY22

CHAPTER 4: DISCUSSION AND RESULTS25

4.1 Emperical Resuts25

4.2 Long-run dynamics33

4.3 Short-run dynamics36

CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS41

REFERENCES45

CHAPTER 1: INTRODUCTION

Overthe past two decades, some less developed countries (hereafter, LOCs) in Sub-Saharan Africa have experienced increases in their foreign exchange reserves as well as increases in their import volume. For example, Nigeria leads Africa in foreign reserve ranking, with $43.307 billion in 2006, and is ranked 27th in the global listing of nations with the highest reserves (see The World Factbook2 for details). She is followed by South Africa ($29.334 billion) in the African ranking (South Africa is 31st in the world)." Also, ranked among the first 100 countries in the world in terms of highest foreign reserve is Kenya with $2.680 billion. (ranked at 92). The sources of these reserves have been export earnings, foreign assistance and, more importantly, remittances of Africans residing abroad. As a consequence, in the period 1973-2005, imports by these countries grew at much faster rates than their GOP volume. Imports averaged 15.74, 7.83 and 15.86% per year, whereas GOP volume averaged 5.68, 7.13 and 4.10 in Kenya, Nigeria and South Africa, respectively. In the global listing of countries with the highest imports in September 2007, these countries are ranked as follows: Kenya is ranked 90th; Nigeria is ranked 53; and South Africa is ranked 36th (see The World Pactbook. noted above). The purpose of this paper is to understand empirically the possible contribution ofthese factors in explaining the short- and long-run import behavior of these countries.

Foreign reserves playa vital role in the design and evaluation of current and future macropolicies aimed at achieving the trade ...