Terms of Trade Volatility and Economic Growth in Sub-Saharan Africa

This paper investigated the effect of terms of trade growth and its volatility on economic growth in Sub-Saharan Africa. I employed dynamic panel data models of difference and system GMM that could account biases associated with endogeneity of explanatory variables and problems induced by unobserved country specific characteristics. I used both net barter terms of trade and income terms of trade as a measure of terms of trade for the entire analysis of this paper. Using data from 1985 to 2010, I found that the net barter terms of trade and income terms of trade growth has positive and significant effect on economic growth. Furthermore, the result proved that volatility of net barter terms of trade and income terms of trade have negative and significant effect on economic growth. Finally, this result is found to be robust using alternative volatility measures.