ECONOMIC OPENNESS, TRADE RESTRICTIONS AND EXTERNAL SHOCKS - MODELING SHORT-RUN EFFECTS IN SUB-SAHARAN AFRICA

The trade restrictions imposed by most sub-Saharan Africa countries ha ve clearly reduced the openness of their economies. However, it is not clear that this protectionism has reduced the impact of external shoc ks. Instead, the type of restrictions chosen, import rationing, has in troduced new transmission channels for external shocks. A dependent-ec onomy model is developed to compare export price shocks with and witho ut import rationing, and the type of trade regime is shown to have qua ntitative importance in a CGE-model of Zimbabwe. The economies are sho wn to be more vulnerable to external shocks under import rationing tha n with trade liberalization, and real exchange rate depreciation can g o hand in hand with a positive external shock contrary to the 'Dutch d isease' story. The outcome is a result of a resource-expansion effect: a higher export price stimulates growth by improving the import capac ity in a situation of rationing and unemployment. (C) 1998 Elsevier Sc ience B.V.