Aggregate Trade Response to Economy-Wide Distortions in Sub-Saharan Africa

The effects of economy-wide distortions on economic performance have received close attention in the empirical literature for developing countries. This paper extends the analysis to investigate the effects of these distortions on aggregate trade in Sub-Saharan Africa. Using pooled time-series and cross-section data for 33 countries in the region during 1970-87, it is established that overvalued real exchange rates were common, that they functioned as a tax on aggregate export supply and that they stimulated import demand. Also, aggregate export supply is found to be price inelastic. The Marshall-Lerner condition is met for the sample of countries considered. It is also established that African trade responds significantly to external factors, including international prices and world income. Also, the behaviour of the real exchange rate in Sub Saharan Af