THREE ESSAYS ON TRADE AND DEVELOPMENT IN SUB-SAHARAN AFRICA

This is a 3 essay dissertation on trade, exchange rate and development in Africa. The first chapter examines the extent to which financial development and trade openness mediate the impact of exchange rate regimes on productivity and growth. The empirical evidence on the relationship between exchange rate flexibility and growth in developing economies is mixed. Arguably, this relationship depends on the underlying characteristics of an economy, often overlooked in studies of the impact of exchange rate regime choice. The chapter investigates and estimates the relationship between exchange rate regimes and growth in Africa across the distribution of the level of financial development and trade openness. I find that exchange rate flexibility has a negative effect on growth. Greater financial development and trade openness; however, enhance the potential benefits of flexible regimes, and hence lessens the negative growth effect. The second chapter examines the impact of the African Growth and Opportunity Act (AGOA) for Sub-Saharan African countries. The objectives in this chapter are two fold. First, it evaluates the total trade creation impact of AGOA using synthetic control method (SCM); a quasi-experimental approach that addresses limitations in existing empirical approaches to examining the impact of preferential trade agreements (PTAs). Second, it explores possible determinants of the variations in the estimated impact across countries and review the underlying mechanisms driving the variations. The main finding is that most countries registered gains in exports due to AGOA. The results, however were varied and export gains were largely unsteady. The variation in the impacts is largely explained by infrastructure, institutions of legal frameworks, ease of labor market regulations and the macroeconomic environment including stable exchange rates and low inflation.Using new data on global value chains (GVC) of textile and apparel associated with AGOA exports, the third chapter examines the role of rules of origin in restricting domestic value addition in exports and; hence industrialization in sub-Saharan Africa. Though there is a lot of evidence, albeit mixed, on how PTAs such as AGOA affect aggregate exports, evidence on whether the preferential market access leads to the dy- namic benefits of growth is still contentious. Countries who benefit from the ‘Special Rule for Apparel ’ under AGOA with liberal rules of origin registered significant increases in textile exports. But, the foreign value added content of their exports increased sig- nificantly following AGOA. This raises questions about the realization of the dynamic growth returns from exporting following AGOA, accompanied by liberal rules of origin.