Growth volatility and openness in sub-saharan Africa

Abstract

There is no a unique agreement regarding the impact of trade openness and financial openness on growth volatility. We carried out an empirical investigation using system GMM to assess the impact of openness on growth volatility in Sub-Saharan African. The analysis considered a panel of 29 countries from 1981 to 2010. According to our results, contrary to earlier findings, both trade and financial openness significantly reduce growth volatility in Sub-Saharan Africa. However, financial openness isn’t found to be robust for different specifications. We further decomposed trade and financial openness. Trade in ‘manufacturing goods’ significantly reduce volatility in comparison to trade in ‘nonmanufacturing goods’. A further decomposition of financial openness into FDI and portfolio flows does not reveal a significant effect on growth volatility.