Determinants of Output Growth in Africa’s Non-Oil Producing Countries (ANOPCs)

Edward Oladipo Ogunleye ,Oluwaleye Adeniji

doi:10.7176/jesd/11-8-15

Abstract

This study examined the determinants of output growth in the 14 selected non-oil producing countries in Africa, using annual time series data spanning from 1980 to 2016 sourced from the World Bank, World Development Indicator (WDI) and IMF International Financial Statistics (IFS). Error-correction based panel cointegration test was employed to test for the panel cointegration between output growth and some selected macro-economic variables. Results revealed that there is a long-term relationship between output growth and the selected macroeconomic variables; that the responses of output growth to the shocks from world oil price are positive and significant in some of the countries which were able to explore alternative sources of energy; that the responses of output growth to the shocks from Federal Fund Rate (FFR) are significant in all the selected countries, among others. Based on the findings, it is recommended that over reliance on oil can be reduced by diversifying into non-oil sources of energy such as natural gas and renewable sources of electricity such as hydro, geothermal, solar and wind. The study also recommends that stable exchange rate policy should be adopted across all African non-oil producing countries as this will go a long way in creating a predictable climate for investment, enhance more proceeds from exports and appreciate domestic currency. Keywords : : Crude oil, Monetary Policy, Output Growth, Error-Correction Based Panel Cointegration Test and African non-oil producing countries(ANOPCs) DOI: 10.7176/JESD/11-8-15 Publication date: April 30 th 2020

Highlights

There is no country in the world either developed or developing that is not concern about what determines her output growth
The results revealed that Federal Fund Rate (FFR), INFR, INTR and World Oil Price (WOP) exhibited negative and significant impact on output growth (GDPgr) while Gross Capital Formation (GCF) and Money supply growth rate (MSGR) have positive and significant impact on output growth (GDPgr)
Results from the study revealed that the response of output growth to the shocks from world oil price are positive and significant in some African non-oil producing countries who were able to explore alternative sources of energy

Summary

Introduction

There is no country in the world either developed or developing that is not concern about what determines her output growth. The aim of this study is to investigate the actual determinants and the major driving forces behind the output growth of ANOPCs. Crude oil is arguably one of the most important commodities in today’s industrialized economy, as it represents a crucial energy source for many countries. All the ANOPCs are predominantly producers of primary products many of them depend largely on importation making them import-dependent economies. This is another reason why many of the macroeconomic policies of many countries in the ANOPCs are highly prone to external influences. To cope with these external influences macroeconomic policies are subject to frequent changes in order to cope with a prevailing situation presented by the external forces at a certain period of time (AFDB 2014)

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Conclusion