The Effect of Exports in SACU Countries: an Empirical Analysis Using Panel Data

Abstract

Simultaneity bias is an issue that do arise in most cases, when all variables in a model are interdependent. The study responds to this challenge by employing panel data models to analyse the effects of exports in SACU countries. The study applies stationary data estimation techniques to a sample of five (5) SACU countries over the period 1980-2016. The study finds that exports positively and significantly affect GDP per capita in SACU region. In addition, the fixed effects and random effects models clearly show that heterogeneity effects are significant, while the time effects are not significant in explaining the GDP per capita in the SACU region. This implies that country differences such as institutional, political and economic policy systems, among others, not included in the models are significant in explaining GDP per capita in SACU region. Finally, the study finds that SACU countries are enjoying increasing returns to scale. On the policy front, it should be noted that the long-standing trade liberalisation and trade openness agendas of SACU have had a significant impact on economic growth and this has led to an upsurge in exports. Therefore, the SACU region, must focus more on structural transformation which involves moving their specialisation patterns to more sophisticated goods and services in order to bolster their comparative advantage in international markets which affects economic growth through exports.