Sub-Saharan Africa's growth, South-South trade, and the generalised balance-of-payments constraint

Using the post-Keynesian balance-of-payments constrained growth approach, we investigate the recent increase in Sub-Saharan Africa (SSA) growth, focussing on the contribution of South-South trade. The model is estimated by panel co-integration on a sample of 20 low- and lower-middle-income SSA countries, using annual data from 1990 to 2008, and considering three partner areas: SSA itself, developing Asia and the rest of the world. The results show that in the past decade the balance-of-payments constraint of SSA has been relaxed. This shift has occurred through different channels of transmission: the other SSA countries contributed through the real growth effect, developing Asia through the market share effect and the rest of the world through the terms of trade effect. These results help reconcile puzzling evidence on the pattern of SSA external indebtedness and provide new insights on the role of ‘Asian drivers’ on SSA growth, as well as on the sustainability of SSA growth recovery.