MEDIATION ROLE OF EXPORTS AS A CAPACITY TO IMPORT, INFLATION, AND GDP GROWTH ON TRADE BALANCE IN SUB-SAHARAN AFRICA
Nahabwe Patrick Kagambo John, Kagarura Willy Rwamparagi, Munyambonera Ezra
Kabale University, Kabale, Uganda
Abstract
This study examines the mediation role of exports as a capacity to import, inflation, and GDP growth on the trade balance in Sub-Saharan Africa from 2005 to 2022. Using a quantitative research design, the analysis utilizes a fixed effects modeling approach with balanced panel data from the World Bank. The dependent variable is trade balance, while independent variables are interactions between: exports as a capacity to import and foreign direct investment; government expenditure and inflation; foreign exchange rates and GDP growth.
Fixed effects model reveals statistically significant interactions among the variables, with an adjusted R-squared of 0.972, indicating that the mediation effect explains 97.2% of the variation in trade balance. Key findings highlight that the interaction of exports as a capacity to import and foreign direct investment has a negative and statistically significant coefficient (-0.205), suggesting that a 10% increase in these factors results in a 2.05% deterioration in trade balance.
Conversely, the interaction of inflation and government expenditure yields a positive and statistically significant coefficient (0.021), indicating a 10% increase in these variables leads to a 0.21% improvement in trade balance. Diagnostic tests for multicollinearity and normality confirm the robustness of the model. The study recommends that governments prioritize enhancing export capacity through targeted investments while managing inflationary pressures and optimizing fiscal expenditure to stabilize trade balance.
Keywords: Exports as a Capacity to Import, Inflation, GDP Growth, Trade Balance, Sub-Saharan Africa
Journal Name :
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EPRA International Journal of Economics, Business and Management Studies (EBMS)
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Published on : 2025-01-09
Vol | : | 12 |
Issue | : | 1 |
Month | : | January |
Year | : | 2025 |