Economic fluctuations and growth in sub-Saharan Africa: The importance of import instability

The traditional thesis that export instability (XI) is deleterious to econo mic growth in developing economies has received mired empirical results. Fo r African countries, recent research suggests that the effect of XI is weak , bur that capital (investment) instability (KI) adversely influences econo mic growth. The current study argues that in many of these nations, imports are likely to be critical to the growth process, while exports represent o nly one of the various sources of investment resources. Hence, import insta bility (MI) may pose a more serious problem than XI in hindering economic g rowth. Employing 1968-86 World Bank data for 33 sub-Saharan African countri es, XI, KI and MI variables are calculated for each country as the standard errors around the respective 'best-fitted' trends over the sample period. These instability measures and additional World Bank data are then used to estimate an augmented production function that controls for the effects of labour; capital, and exports. The study,finds that although KI is still a r elevant argument of the production function, MI appears to be even more imp ortant,while XI is extraneous.