Does Export to Japan Promote Economic Growth in Africa? A Panel Data Analysis

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

Does Export to Japan Promote Economic Growth in Africa? A Panel Data Analysis

Gael Fokam
The Dschang School of Economics and Management, Dschang, Cameroon

Abstract: This study investigates how export to Japan affects economic growth in 8 African countries, namely: Algeria, Egypt, Morocco, Kenya, Liberia, Nigeria, South Africa and Tanzania for the period 2004 – 2016. For this purpose we employ Ordinary Least Squares (OLS), fixed effects (FE) and random effect estimations. The empirical evidence shows that export to japan positively affects economic growth of selected African countries. The above findings are broadly consistent with ELG hypothesis and most empirical studies.

Keywords: Economic growth, export, Panel data, Africa

Jel Classification : O55 F14 F55

I. INTRODUCTION

Two main reasons motivate this inquiry, namely: (i) growth trends of Africa-Japan trade relationship and (ii) gaps in the literature.
First, since the first Tokyo International Conference on the Development of Africa (TICAD I) in 1993, trade relations between Africa and Japan have been discreet and timid. Under the pressure of the Chinese neighbour, with its “Go Global” strategy that allows China to cover all African countries, Japan tries to revitalize its trade relations with Africa. So, according to Fundira (2012), between 2002 and 2010 the cumulative growth of Japan’s total trade with Africa increased by 27%, with export and import increasing by 28% and 30% respectively. However, the economic impact of export to Japan in Africa is not yet clear.

Second, whereas the substantial part of the literature has investigated the economic impact of export in both developed and developing countries, scholarly focus on the impact of export to japan on economic growth of African countries is scarce. Accordingly, several studies have examined the theoretical link between export and economic growth. The export-led growth hypothesis argues that higher exports lead to higher economic growth for many reasons. First, exports relax binding foreign exchange constraints and allow increases in imported capital goods and intermediate goods (McKinnon 196). Second, export facilitate more competition, faster technological progress and allow poor countries with narrow domestic markets to benefit from economies of scale (Balassa 1978, Krueger 1980).Several empirical studies have tried to verify this hypothesis, but results still inconclusive. There is a branch of the literature which argues that export can accelerate overall economic growth and thus support the export-led growth theory (Balassa, 1978; Fosu, 1990; De Gregorio, 1992; Islam, 1998; Todaro 2000; Konya, 2004; Awokuse 2005; Vianna, 2016; Chia Yee Ee, 2016). Conversely, another stream of the literature reveals the possible negative correlation between export and economic growth (Jung and Marshall, 1985; Yamada, 1998; Konya, 2004), even the possibility of no correlation between export and economic growth (Ahmad and Kwan, 1991; Dodaro, 1993; Yaghmaian, 1994; Islam, 1998).

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