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Technological Innovations in the Control of International Exchange: Lessons for Africa
Author(s) -
Ngameni Joseph Pasky,
Khan Muhammad Arshad
Publication year - 2019
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12368
Subject(s) - cointegration , foreign direct investment , economics , unobservable , investment (military) , exchange rate , international economics , technological change , panel data , gross domestic product , international trade , monetary economics , macroeconomics , econometrics , politics , political science , law
Empirical studies on international trade highlight the role of innovation on international exchange but do not capture the effect of technological innovation when unobservable common factors (UCFs) are considered. This paper examines the long‐run relationship between technological innovation and international exchange using panel data for eight African countries over the period 1981–2013. The non‐stationarity and cointegration between technological innovation, international exchange, public investment, real gross domestic income and foreign direct investment were examined, controlling for cross‐sectional dependence and heterogeneity between countries. The results suggest that technological innovation in Africa remains low after controlling for UCFs, while public investment, real gross domestic product and foreign direct investment have significant impact on international exchange. Moreover, the results from the homogeneous and heterogeneous estimates, with and without UCFs, show that ignoring UCFs is likely to bias the coefficients. These findings reveal that African countries should invest more in public infrastructures and research and development to upgrade their capability To play an active role in the international market.