External Debt and Export Diversification in Sub-Saharan Africa

Abstract: This paper aims to examine the impact of external debt on export diversification in sub-Saharan Africa (SSA). The study uses the method of generalized moments (GMM) in difference and in system. The data are annual, from secondary sources, relating to 30 SSA countries and cover the period 2000-2014. The robustness tests are based on the 2SLS (double least squares) estimator and the CUE (continuously updated estimator). Empirical results show, among other things, that external debt has a positive and statistically significant effect on export diversification in SSA countries. These results imply that policy makers in SSA countries need to contract external debt to finance investments with high export diversification potential. Keywords: External Debt, Export Diversification, GMM, Sub-Saharan Africa JEL Classification Number: F34, P33, C23, N17