Effect of trade shock on inequality, unemployment and inflation in Sub-Saharan Africa Online publication date: Tue, 14-Mar-2023
by Chinwe Okoyeuzu; Ebere Ume Kalu; Angela Ukemenam; Augustine Ujunwa
International Journal of Business and Globalisation (IJBG), Vol. 33, No. 4, 2023
Abstract: We studied the impact of trade shocks on inequality, unemployment and inflation in 35-Sub-Saharan African countries from 1997 to 2018. Using the VECM framework, we confirm a strong correlation among trade, inequality, unemployment and inflation, and find that adverse shock from trade promotes inequality, unemployment and inflation in Sub-Saharan African countries. This implies that the gains from trade are elusive in Sub-Saharan Africa, and the channels of the negative shocks could be imports surge relative to exports; job loss by workers in sectors with greater initial exposure to export surge; imported inflation and labour immobility between trade partners. Based on the findings, the study recommends that Sub-Saharan African countries need to rethink their trade engagement, in terms of restructuring their economies and strategic engagement with trade partners to optimise the gains of trade.
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