Mobile and Internet Usage, Institutions and the Trade Balance: Evidence from African Countries

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This study examines the influences of institutions; the Internet and mobile usage on the trade balance of African countries between 2003 and 2017. Our empirical results have been estimated with a panel-corrected standard error method (PSCE) and they have been confirmed by several alternative techniques. First; the increase of internet usage and mobile usage has a significant negative effect on total and inter-continental trade balances while these factors improve the intra-African trade balances. Second; better institutions appear to have a negative impact on the total-; inter-; and intra-African trade balances – in other words; better institutions appear to stimulate imports rather than exports. This observation explains the decreasing trends in the current account balances of African countries. Third; the combined effect of the three factors (institutions; internet; and mobile use together) has a significant positive impact on all trade balances: total-; inter-; and intra-continental. Our study shows that an improvement in institutional quality acts as a mitigating factor for any negative impact internet\mobile development might cause on the trade balances of African countries. Further; our analysis examines the influence of institutions; internet usage; and mobile usage on the two parts of the trade: exports and imports. We observe that internet and mobile can influence negatively and differently impact the two wings of the balance trade. However; all improvements in institutions and their associations with internet usage and mobile usage have a significant positive impact on the trade balance especially on exporting activities of African countries.