Domestic Demand or Trade Led Growth Hypothesis For Southern Africa Development Community (SADC) Countries? A Search For A New Development Paradigm.

Abstract

There have been weaker growth rates, globally, being coupled with an increase in trade protectionist policies, fall in commodity prices, and high economic uncertainty in developed nations. Developing countries face weak external positions due to overreliance on trade to improve growth. In this context, this study uses the Auto Regressive Distributed Lag (ADRL) approach to evaluate the applicability of the trade led and domestic demand led growth (DDLG) hypothesis using a sample of 12 SADC countries over the period 1994- 2019. The DDLG hypothesis is more applicable over both the short and long run. The exports led growth hypothesis is not applicable while the imports explain growth in the long run. There is joint causality from domestic demand and imports to growth. Individual countries adjust to the long-run equilibrium at different speeds, which confirms short-run heterogeneity while long-term outcomes converge. The study offers some policy implications