Export Trade and Real Exchange Rate Dynamics in Sub-Saharan Africa: A Dynamic Panel Analysis

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue IX, September 2020 | ISSN 2454–6186

Export Trade and Real Exchange Rate Dynamics in Sub-Saharan Africa: A Dynamic Panel Analysis

Kenneth Chikezie Anyalechi*, Emeka Okereke, and Ikechukwu S. Nnamdi
Department of Finance and Banking, University of PortHarcourt, Nigeria.
*Corresponding Author

I. INTRODUCTION

The effect of exchange rate variation on international trade becomes one of the critical issues for economic policy makers. Debates around this issue come to the fore because there is no consensus on whether variations in exchange rate affect foreign trade activity. In this direction, Khosa, Botha and Pretorius, (2015) argued that a cursory look at raw data without in-depth analysis, makes it difficult to establish the nature of the relationship between exchange rate variations and trade, while lack of clarity on this subject increases the risk of improper planning by international trade partners as well as implementation of economic policies. Hence, real exchange rate is widely considered an important macroeconomic measure which underlies the adoption of certain economic policies (Kurtovic, Halili & Maxhuni, 2017; Hunegnaw, 2017). Even though the study in this area is not yet conclusive, there is a general consensus among professionals that exchange rate influences trade balance in the long run (Chaudhary, Hashmi & Khan, 2016).
International trade generally relates to both physical goods and services. Although there has been a clear shift in the structure of global economic activity to services for all economies (Organisation for Economic Cooperation and Development [OECD], 2005), it accounts for a much lower share of total trade (United Nations Conference on Trade and Development [UNCTAD], 2018). Trade in intermediate goods equally creates an additional linkage across countries (European Central Bank [ECB], 2016). Moreover, a transition towards a more resource efficient circular economy has in recent times brought a whole new dimension to the international trade landscape. (OECD, 2019b) explain that evolving trade pattern takes the form of product value chain which may include second-hand goods, waste, scraps and trades in related services. Besides providing consumers with a range of goods and services, international trade also increases incomes and employment (Seyoum, 2009). Vijayasri

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