Health and economic growth in Sudan: Cointegration and Granger causality analysis (1969-2015)

Abstract

Abstract. The relationship between human health and economic growth is complex. Its analysis is further complicated by the indicators used to measure health as indirectly observed. Improved health status requires increases in supply and demand for health care services driven by both economic and non-economic factors including GDP, GDP Per capita, inflation, population, fertility rates, life expectancy at birth, morbidity and mortality rates as well as education. On the other hand, health improvements measured for example by reductions in child mortality rates and increases in life expectancy rates have proven positive effects on economic growth. This study sought to explain the interplay between the state of health and economic growth in Sudan. The study is mainly an empirical investigation employing the econometric methods of Johansen cointegration test, the vector error correction modeling (VECM) and Granger causality analysis using annual time series data for the period 1969-2015. The cointegration test shows that a long-run equilibrium relationship exists between health status and economic growth. The VECM results show that health expenditure, under-five mortality and immunization have significant positive effects on economic growth in the long run, while total investment and CO 2 emissions have no significant effect on GDP. In the short run, total investment and CO 2 emissions have significant negative effect on GDP though in two years period. In the short run, GDP is mostly and significantly affected by total health expenditure and immunization but not by the under-five mortality rates. The error correction term has the correct negative sign showing that the dependent variable GDP converges to steady state equilibrium at speed of 32%. Granger causality analysis shows a unidirectional relationship running from GDP to health expenditure, while a unidirectional relationship running from under-five mortality rate to GDP is established. CO 2 emissions are found to cause GDP with no sign of feedback effect. The study recommends that government should ensure macroeconomic stability in terms of stable growth, increase the resources to the health sector in order to achieve the under-five mortality MDG and effective coordination with donors to ensure full coverage of children immunization. Keywords. Health, Health expenditure, Economic growth, Cointegration, VECM, Sudan. JEL. H51, I10, F43.