Cyclicality of public investment in Africa

Abstract

In this paper we examine the cyclicality of public investment in African countries using panel data for the 1996-2012 period. In addition to an overall analysis of the African continent, we also examine public investment in country sub-groups such as the West African Economic and Monetary Union (WAEMU), the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (EECAS), the Central African Economic and Monetary Community (CEMAC), the Intergovernmental Authority on Development in Eastern Africa (IGAD), and the South African Development Community (SADEC). We use contiguity and distance-based spatial weighting in analysing spatial spillovers from economic shocks on public investment spending. While our results confirm procyclicality in public investment, the degree of procyclicality varies significantly across the country groups. Procyclicality becomes less significant when spatial spillovers are considered for WAEMU, ECOWAS, CEMAC, and IGAD countries but it becomes stronger for ECCAS, and particularly SADEC countries.