The generative powerof air freight in the trade openness - Economic growth nexus in African countries

Foreign trade matters considerably more than ever in today's integrated economies, and the wealth of benefits afforded by air transport is one of the cornerstones of international trade. Therefore, to shed light on the precise role of air cargo, seen as an important motor of growth, this paper provides an empirical model to examine the relationships among trade openness, air freight volume and GDP per capita using panel cointegration techniques for a sample of Economic Commission for Africa (ECA) countries during the 1970-2002 period. The analysis substantiates that there are cointegrated relationships among the three variables and that they are bound together in a long-run equilibrium. Furthermore, evidence from fully modified Ordinary Least Squares panel estimations also indicates that positive trade and air freight shocks contribute to real GDP per capita. In addition, improvements in air cargo services are accompanied by an increase in trade openness in ECA countries and vice versa. These results underscore the important role of air freight and demonstrate that it should not have been overlooked in earlier studies. Finally, the empirical findings have important policy implications for our sample countries.