The African Financial Review July-August 2014 | Page 59

Trade openness, institutions and
economic growth in Sub-Saharan Africa
(SSA)
By Matthew, A. Oluwatoyin and Adegboye, B. Folasade

A major discourse in literature is that one of the causes of the limited growth effects of trade
liberalization is the weakness of institutions. The main objective of this study is to investigate the
impact of trade openness and institutions on economic growth in Sub-Saharan Africa (SSA). Institutions
are crafted by man to create a peaceful habitation and reduce uncertainty in the exchange of values;
and they play key roles in the management of economies in recent years. The study is significant
considering the fact that trade and institutions have been found to exert some measure of influence
on the growth of countries. However, evidence has shown that not much has been done in relating
institutions to trade in SSA. The study employed econometric analyses involving the Panel Unit Root,
Least Square Dummy Variables (LSDV) and the Generalized Method of Moments (GMM) techniques for
the period 1985-2012 on thirty selected SSA countries. Secondary data were used for the estimations.
The major findings of the study revealed that institutions had a significant positive impact on economic
growth but trade openness only had a little significance on growth in the selected SSA countries.
Therefore, the study recommended that the SSA countries should ensure that funds be channeled
appropriately to projects of economic importance so as to further develop their institutions to
have meaningful impact on economic growth. These SSA countries should also create conducive
economic and political environments that will engender free international trade between them and
other countries of the world.

The African Financial Review | 59