Economic Growth In African Countries Research Articles

The Effect of Inflation Targeting (IT) Policy on the Inflation Uncertainty and Economic Growth in Selected African and European Countries

The study assessed the effect of inflation targeting (IT) policy on inflation uncertainty and economic growth in African and European IT countries. This study contributes to the existing knowledge by analysing and comparing the African IT and European IT countries using two advanced approaches which include the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) and Panel Vector Autoregressive (PVAR). To determine how the IT policy affects the inflation uncertainty in selected countries, time series techniques were employed. Panel data approaches were used to determine the effect of inflation targeting on economic growth in the selected countries. The results are as follows: (1) Inflation Targeting policy is insignificant in reducing inflation uncertainty in South Africa, and the effect of the policy in Ghana is inconclusive; (2) The IT policy has a significant impact in reducing inflation uncertainty in European countries (i.e., Poland and the Czech Republic); (3) Inflation targeting has a negative impact on economic growth in African Countries; (4) The policy has a positive impact on economic growth in European Countries; (5) In comparison to European countries, the strategy has a negligible impact on economic growth in Africa. Overall, the results suggest that European countries inflation targeting regimes are more credible in terms of reducing the level of inflation uncertainty and sustaining economic growth compared to African countries. In this respect, policymakers must ensure that they assess the economic condition of an individual country before implementing such a policy.

Does the introduction of stock exchange markets boost economic growth in African countries?

We assess whether the introduction of private equity capital markets affects economic growth in African countries. We address this issue by focussing on stock exchange markets as the predominant type of new equity markets, using a Diff-in-Diff regression method. The analysis uses a panel data set from 48 Sub-Saharan countries over the time range of 1970–2018. 23 countries are part of the “treated” group – which introduced international stock exchanges – and 25 “untreated” countries serve as the control group. Our results show that when compared with the time period prior to the introduction of stock exchange markets, GDP per capita rises by the amount of 532 US$ (around 40% of the Sub-Saharan average) after the introduction of equity capital markets in the treated countries. Over the ten years post introduction, the effect is hump-shaped, with effects becoming statistically significant from the first year after implementation, with a peak in the 5th year, and it then becomes statistically insignificant from then onwards.

Determinants of Africa’s Development: An Exploratory Study

The increasing sustainability and the causes of economic growth in African countries, provide a set of new research questions for development scholars around the World. The possible determinants of this phenomenon are usually considered to be of economic, social, and institutional natures. In this work is assessed which economic, social, and institutional determinants of economic development are important to the development of Africa countries, for the years 1996 and 2014. The similarities amongst countries and the evolution between the two years are also analyzed. A principal components analysis for categorical data to examine the inter-relationships between the indicators in 1996 and also in 2014. An agglomerative clustering algorithm was used through two different methods: ward’s method and complete linkage method (also called furthest neighbor). The Hierarchical Cluster Analysis (HCA) was suited by a k-means algorithm, to obtain an optimal solution and a typology of countries was identified for each year. The main contribution of the work is to make a joint analysis of the three determinants of economic growth and development – economic, social, and institutional, in which the literature is extremely scarce. Results indicate a positive association amongst institutional, economic, and social determinants of development, which means that countries that exhibit a good performance in institutional indicators also have a good performance in economic and social indicators, and vice-versa, although results are not as clear for 2014 as they are for 1996. Additionally, a higher concentration of countries in the two clusters in which these three indicators are better in 2014 (31 countries in 1996 and 49 countries in 2014), seems to indicate a positive evolution for development of African countries from 1996 to 2014. Results show that policy makers should take an integrated view regarding development and economic growth policies and take in consideration both the economic, social, and institutional characteristics of each country. If an economic, social, or institutional policy is designed independently of the other two, this policy will probably fail in reaching its development or economic growth goal, since all these three factors are interconnected.

The impact of China's trade, aid and FDI on African economies

PurposeThis study examines the impact of China’s trade, aid and foreign direct investment (FDI) on the economic growth of Africa.Design/methodology/approachOur study covered 41 countries in Africa, cutting across the western, eastern, central, southern and northern sub-regions. The study adopted the dynamic system generalized method of moments (SGMM), feasible generalized least squares (FGLS) and Dumitrescu–Hurlin Panel Granger causality techniques for estimations.FindingsOverall, FDI, trade and aid from China have a nonlinear relationship with Africa’s economic growth. The findings reveal a key novelty in that the marginal effect on real per capita GDP increases when China’s FDI interacts with the manufacturing sector in Africa. These findings are robust to long-run estimations.Research limitations/implicationsGiven that we have examined the short-and long-run symbiotic effects of China’s FDI and Africa’s manufacturing sector and China’s aid and Africa’s manufacturing sector, more studies are warranted in this area, particularly to produce further empirical evidence of these findings. Moreover, future work could focus on investigating the country-specific effects of China’s trade, China’s FDI and China’s aid on real GDP per capita in each African country as our results reflect within-country elasticities.Originality/valueThis study provides new evidence on the impact of China’s trade, aid and FDI on the growth of African economies. To the best of our knowledge, this is the first study to empirically explore the long-run effects of China’s trade, FDI and aid on economic growth in African countries. This study also tests the claim of the displacement of Africa’s manufacturing industry by its Chinese counterparts.

The Causal Relationship Between China-Africa Trade, China OFDI, and Economic Growth of African Countries

Recently, China has emerged as the largest trading partner and a significant source of investment in the African continent. Although there is consent on the increasing importance of China and Africa’s economic partnership, there are many controversies on how it affects African countries. Debates on China in Africa have, however, relied on grandiloquence rather than empirical studies. This study explores the causal link between China-Africa trade, China’s outward foreign direct (OFDI), and economic growth of 24 Sub-Saharan Africa countries from 1999 to 2018. The aggregated panel is classified into upper-middle-income, low-middle income, and low-income Sub-Saharan African countries. In the long run, key findings from the feasible generalized least squares (FGLS) estimator unveiled that; (i) China-Africa trade negatively contributes to economic growth among all panels. (ii) China’s OFDI improves economic growth in the low middle and low-income African countries whereas a significant negative liaison is evidenced in the upper-middle-income African countries. (iii) Labor force have a negative impact on economic growth whiles gross capital formation is evidenced to positively impact economic growth at all the panels. The Dumitrescu and Hurlin Granger causality unveiled a one-sided causal link from China-Africa trade to economic growth at all panels. The study proposes policy recommendations based on the results.

RESSOURCES NATURELLES ET INSTITUTIONS : UNE NOUVELLE EVIDENCE POUR LES PAYS D’AFRIQUE ?

The objective of this research is to re-examine on one hand, the effect of natural resource exploitation on economic growth of African countries, and on the other hand, analyse the role of institutions of governance in transmitting these effects. By adopting a GMM technique in a dynamic panel, we show that over the period 2002 to 2018, natural resource rents have a positive influence on economic growth in African countries. This effect disappears when we control the econometric model with variables such as control of corruption indicator, political stability measure and quality of regulation. Hence, Governments and political leaders need to fight corruption through transparency in the management of rents from natural resources and it’s exploitation. In addition, there is a need to ensure political stability through greater transparency in electoral processes and respect of the will of citizens. Finally, for a better regulation, government should set up necessary policies for emergence and for a good functioning of the private sector.

The Impact of African Continental Free Trade agreement

The birth of African Continental Free Trade agreement which came into effect on the 1st of January 2021, has a huge positive impact on the continent. The implementation has brought about enormous economic growth in African countries. African Continental Free Trade agreement is the World largest trade bloc since the creation of World Trade Organisation in 1994. It has united 1.3billion people and with annual trade potential of over $4trillion. The implementation of AfCFTA has increased the movement of people across the subregion ahead of the planned/envisaged introduction of continental passport. In all paradigms, AfCFTA has unlocked the growth and development potentials tied down for decades. This is a gigantic step toward the actualisation of the four-cardinal principle/pillar laid down by the founding fathers of the African Union, which are: Economic, political, social, and technological integration. The unity of African countries depends solely on their economic integration brought about by the implement of AfCFTA. This is the vehicle that will take African continent out of the abject poverty, under-development, and low standard of living. The free trade agreement is a win-win for all the African countries. It has boosted, trading activities, production capacity, employment aggregate and income gains on the continent.

Threshold Effect of Raw Material Prices on Economic Growth of African Countries

We study the nonlinear effects of raw material prices measured by that of cotton product on the economic growth of a sample of African countries for the period of 1991–2019. Using the procedure for determining endogenous thresholds (Hansen, 1999) [Threshold effects in non-dynamic panels: Estimation, testing, and inference. Journal of Econometrics, 93, 345–368], the study revealed that raw material prices positively affect economic growth when the prices reach a threshold above 96.1. These results indicate that to be effective, any economic policy measure aimed at accelerating the economic growth of these commodity-dependent countries must take into account the level of raw material price indices, the quality of governance, and the level of financial development.

The long‐run relationship between ODA, growth and governance: An application of FMOLS and DOLS approaches

AbstractDespite having received a significant amount of foreign aid for several decades, Africa is among the poorest regions in the world. This study examines the relationship between foreign aid, economic growth and governance in the African region during the period 1996–2014 by fully applying both DOLS and FMOLS techniques. In the first stage of this study, we examine the foreign aid effect on economic growth. In the second stage, we assess the intermediary role of institutions in the relationship between foreign aid and economic growth in the African countries. It was found that foreign aid has a negative effect on economic growth in African countries in both FMOLS and DOLS models. However, empirical results indicate that foreign aid improves economic growth in the presence of good institutional quality only in the DOLS model.

The effects of foreign aid, foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities

AbstractThis paper examines the relationship between foreign aid (AID), foreign direct investment (FDI) and domestic investment (DI) and its effects on economic growth in 41 African countries. Annual panel data from 1990 to 2016 are examined using fixed‐effects (FE) and system‐GMM estimators. We test the existence of nonlinearities and complementarities in the relationship between AID–FDI, AID–DI, FDI–DI, and AID–FDI–DI. Empirical results confirm the existence of a nonlinear relationship between AID, FDI, DI, and economic growth. Besides, the results show that AID and FDI have a significant positive complementing effect on economic growth. It is shown also that FDI complements DI, while the coupled effect of AID and DI remains weak in catalyzing growth. Moreover, the results indicate that the complementarity between AID–FDI–DI positively influence economic growth, revealing that AID and FDI work as a complement factor to DI and enhance its effectiveness in promoting economic growth. These insights have important policy implications. Policy‐makers in African countries are well advised to implement concrete policy measures suitable for building on the growth momentum created by foreign capital inflows, like FDI, AID as well as remittance.

Dynamic Relations Between Public External Debt and Economic Growth in African Countries: A Curse or Blessing?

This paper used the Johansen Cointegration test and system Generalised Method of Moments (sysGMM) to examine the dynamic relations between external debt and economic growth in 43 African countries over the period 2001–2018. The study used data from World Development Indicators (WDI) as published by the World Bank and the World Economic Outlook database as provided by the International Monetary Finance (IMF). The study provides an understanding of how the importance of external debt could be short-lived due to its misapplication. The result reveals evidence to support a long-run equilibrium relationship between external debt and economic growth in Africa. The result demonstrates that beyond a specific capacity, the short-run converges to equilibrium in the long-run and external debt would start to have a deteriorating impact on economic growth in Africa. The findings of this study reinforce the need for policymakers to ensure proper application of external debt on economic activities that would lead to sustained long-term economic performance. Moreover, the government and development partners must put in place a monitoring mechanism to ensure the efficient use of borrowed funds.

The Impacts of Chinese FDI and China–Africa Trade on Economic Growth of African Countries: The Role of Institutional Quality

While there is a consensus on the expanding importance of the China–Africa economic relationship, there is much more debate on how to portray the relationship. Thus, this study is aimed to examine the impacts of the China–Africa trade and Chinese foreign direct investment (FDI) on the growth of African countries controlling the mediating role of institutional quality. The two-step system Generalized method of moments (GMM) model is applied using robust data for the period of 2003–2017. Drawing on complementary theoretical perspectives, this study took into account the conditional effect of China–Africa trade and Chinese FDI subject to the institutional quality of African countries and the interdependence of China–Africa trade and Chinese FDI to African countries. The benign impacts of the China–Africa trade and Chinese FDI on economic growth to African countries remain contingent upon appropriate policy action to improve the institutional quality of African countries and the synergies between the China–Africa trade and Chinese FDI to African countries.

The role of China's aid and ODI in the economic growth of African countries

Has external capital, such as foreign aid and foreign direct investment (FDI), been able to help the economic growth in host countries? Our paper examines the effects of China's aid and its overseas direct investment (ODI) on economic growth in 47 African countries from 2003 to 2013. We find that China's aid has significant positive effects on African economic growth. However, China's ODI plays no major role in African countries' economic growth. In addition, the relationship between aid and growth varies according to the different categories of aid, and its marginal contribution is nonlinear.

Re-examining the government expenditure–growth nexus in ECOWAS countries

PurposeThe purpose of this study is to investigate the effect of government expenditure on economic growth in 15 Economic Community of West African States (ECOWAS) countries over the period of 2005–2017. More precisely, this paper investigates whether institutional environment influences the effect of government spending on economic growth.Design/methodology/approachThis study adopts the generalized method of moments-system method of estimation to address the problem of dynamic endogeneity inherent in the relationship. Similarly, unlike previous studies which assume that the disturbances of a panel model are cross-sectionally independent, we account for cross-section dependency and cross-country heterogeneity inherent in empirical modeling using Driscoll and Kraay's nonparametric covariance matrix estimator, adjusted for use with both balanced and unbalanced panels along with Monte Carlo simulations.FindingsThe authors find that though, government spending has a positive impact on economic growth but the level of institutional quality adversely affect that positive impact. This suggests that the institutional environment in ECOWAS countries is a drag and not a push factor for government fiscal operations and/policies. Thus, the results provide empirical evidence that there is a conditional relationship between government spending and economic growth in African countries. That is, the effect of government spending on economic growth is dependent on the quality of institutions. Lastly, these findings suggest that in order for government spending to contribute to economic growth, African countries must develop a strong institutional environment.Originality/valueUnlike previous time series studies for African countries which concentrated on the two variable case, we include institutional quality as a third variable to underline the potential importance of institutional quality for economic growth in ECOWAS countries.

How IFRS influence the relationship between the types of FDI and economic growth

PurposeThe purpose of this paper is to examine the relationships between International Financial Reporting Standards (IFRS), types of foreign direct investment (FDI) – greenfield investments (GFIs) and mergers and acquisitions (M&As) – and economic growth in 49 African countries between 2003 and 2017.Design/methodology/approachIn the study, panel data fixed effects and generalized method of moments estimation techniques are used in order to test the hypotheses.FindingsUsing country-level data obtained from the World Development Indicators, The United Nations Conference on Trade and Development and World Governance Indicators websites, the authors find that IFRS and the types of FDI are significantly related to economic growth. Moreover, our results provide evidence that the effect of GFIs and M&As on growth is influenced by IFRS positively.Research limitations/implicationsWith a handful of exceptions, most African countries do not have active stock markets. Therefore, the authors were unable to determine the effect of capital markets on growth.Practical implicationsFDI has the potential to contribute to economic growth and quality of life. Our findings suggest that policymakers should create incentives for attracting FDI and effective enforcement of IFRS in order to unleash the benefits of FDI on their economies.Originality/valueThe study provides important insights into the effects of types of FDI on the economic growth of African countries and into the role that IFRS play on this relationship.

Manufacturing Sector and Economic Growth: A Panel Study of Selected African Countries

Objective – The manufacturing sector plays an important role in any economy. However, Africa has experienced significant deindustrialisation over the last few decades, whilst economic growth has been on an upward trend over the same period. The high growth rates have mostly been propelled by improved macroeconomic stability and the commodity price boom. Further, the slowdown in commodity prices has recently caused a deceleration of economic growth which begs the question: Does promoting the manufacturing sector result in higher and sustainable economic growth and reduce unemployment? This study assesses the impact of the manufacturing sector on economic growth in 37 African countries. Methodology/Technique – This study employs the System-GMM Model for the period between 1990 and 2017. This technique is ideal as the number of cross-sectional units is greater than the number of time periods. This technique also caters for problems of endogeneity and heteroscedasticity. Findings – The results show that manufacturing value has a positive effect on economic growth in African countries. Therefore, it is recommended that policy makers enact measures to boost manufacturing output. Novelty –The deceleration of economic growth in African countries coupled with high unemployment and poverty levels has brought the issue of re-industrialisation into the spotlight. This study is vital for policy makers in African countries who seek to promote economic growth and employment levels. The study contributes to literature in African countries by incorporating variables such as human capital and institutional quality which are major determinants of economic growth. Type of Paper: Empirical. Keywords: Manufacturing Value Added; Economic Growth; African Countries; System-GMM. Reference to this paper should be made as follows: Moyo, C; Jeke, L. 2019. Manufacturing Sector and Economic Growth: A Panel Study of Selected African Countries, J. Bus. Econ. Review 4(3) 114 – 130 https://doi.org/10.35609/jber.2019.4.3(1) JEL Classification: C23, E23, O14, O40.

Evaluating digital public services

Evaluating digital public services

Effect of Rainfall Variations on Economic Growth in Africa

It is an undeniable fact that African continent is ascribed as an agrarian continent. Majority of the revenue generation and employment options for many of the African countries come from the Agricultural sector. Africa is considered as one of the fastest growing economies in recent times yet, it is vulnerable to climatic risks. These risks have been shown to affect the economic growth of African countries. Using the linear regression model, this study examined the relationship between climate change in form of rainfall variations and economic growth of African countries in past years. The study analyzed secondary datasets of annual rainfall and GDP growth rate of 43 African countries for a period of 25 years between 1991 and 2015. Trends in rainfall variability has impacted on agriculture and hydroelectric power of many African nations, two channels that contribute greatly to the wealth of nations. It is expected that the continent would harness its resources and invest in climate related needs to mitigate against adverse effects caused by rain variation. Keywords: Rainfall, GDP, Economic Growth, Agriculture, Hydroelectricity, and Climate. DOI: 10.7176/JESD/10-8-09 Publication date: April 30 th 2019

Impact of Population Growth on Economic Growth in Africa: A Dynamic Panel Data Approach (1980 -2015)

This study examines the impact of population growth on the economic growth of African countries using panel data approach from 1980 -2015. The impact of population growth on economic growth is still largely controversial at national and regional levels. The study used annual secondary data of fifty three (53) African countries sourced from the World Development Indicators database. Data were collected for economic growth, proxied by GDP, population growth, fertility rate, crude death rate and inflation rate. The data were analyzed using descriptive statistics, as well as dynamic panel models of difference and system GMM. The results of the difference and system GMM suggest that population growth exerts a positive impact on economic growth of Africa while fertility has a negative impact on economic growth of Africa. The paper concludes and recommends that population growth impacts positively on economic growth and thus African countries should adopt and implement pragmatic policy measures that will enhance the productivity of its population so as to reap more demographic dividends.

Impact of Population Growth on Economic Growth in Africa: A Dynamic Panel Data Approach (1980 -2015)

This study examines the impact of population growth on the economic growth of African countries using panel data approach from 1980 -2015. The impact of population growth on economic growth is still largely controversial at national and regional levels. The study used annual secondary data of fifty three (53) African countries sourced from the World Development Indicators database. Data were collected for economic growth, proxied by GDP, population growth, fertility rate, crude death rate and inflation rate. The data were analyzed using descriptive statistics, as well as dynamic panel models of difference and system GMM. The results of the difference and system GMM suggest that population growth exerts a positive impact on economic growth of Africa while fertility has a negative impact on economic growth of Africa. The paper concludes and recommends that population growth impacts positively on economic growth and thus African countries should adopt and implement pragmatic policy measures that will enhance the productivity of its population so as to reap more demographic dividends.