Assessing the impact of technological progress on trade in COMESA: a PVECM approach

Abstract

PurposeThe present study investigates the extent to which technological progress influences trade in the Common Market for Eastern and Southern Africa (COMESA) region over the period 1990–2017.Design/methodology/approachMethodologically, this study uses a rigorous dynamic analysis namely a dynamic vector error correction model (PVECM) to carry out the proposed investigation. Such a procedure ensures that the dynamic behaviour under consideration is properly captured, while simultaneously catering for causality issues.FindingsThe results show that technological progress has had a positive and significant effect on trade for the sample of countries in the COMESA region over the years of studies. Also, the long-run results show that local investment and economic growth have a positive impact on international trade. Furthermore, the short-run estimates allowed us to make further analysis of the results. For instance, it is observed that trade as well results in technological progress as per the study. Hence, there is reverse causation or bi-directional causality between trade and technological progress.Originality/valueVery few research studies have been conducted on the link between technological progress and trade in a macroeconomy. The analysis thus is believed to supplement the dwarf literature on the technological progress and trade nexus by bringing additional evidence from COMESA.