Technological Innovations in the Control of International Exchange: Lessons for Africa

Abstract

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.

Africa and Technology Exchange: Is Financial Aid Effective for the Development of the Continent?

“…The proposed mechanisms give opportunities for African countries to achieve a high development level in a short time because technological cooperation accelerates development. However, their realization is difficult due to the absence of proven mechanisms for South-South cooperation and mechanisms for cooperation with Africa [16], [19]. In this regard, it is necessary to begin the negotiation process as soon as possible.…”