Economic Growth In Sub-Saharan Africa Research Articles

The three-dimensional impacts of governance on economic growth: Panel data evidence from the emerging market

In a modern economy, good governance is considered a prominent factor for economic growth (Liu, Tang, Zhou, & Liang, 2018). However, Sub-Saharan Africa has a poor track record of good governance and economic growth (Fayissa & Nsiah, 2013). Therefore, this study is aimed to investigate the impact of governance on economic growth in Sub-Saharan Africa. Panel data that covers a period from 2005 to 2019 for 34 countries and the principal component analysis (PCA) method are employed to achieve the stated objective of the study. The selected fixed- and random-effect estimations showed that among the six-governance quality indicators control of corruption, government effectiveness, regulatory quality, and rule of law positively affect real GDP per capita (economic growth) while political stability and absence of violence and voice and accountability are statistically insignificant to affect real GDP per capita. The estimations result of composite governance indicators confirmed that except for the political dimension of governance both the economic and institutional dimensions of governance, as well as overall composite governance indexes, positively affect the economic growth of the region. Besides, foreign direct investment, the government fixed capital formation and gross domestic product growth affect real GDP per capita positively in all models while government consumption expenditure and age dependency ratio negatively affect real GDP per capita. Therefore, in addition to the existing support in the improvement of the political activities in Sub-Saharan Africa, concerned bodies should also focus to enhance the economic and institutional dimensions of governance in the region

THE EFFECT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN SOME SUB SAHARA AFRICAN COUNTRIES (SSA)

Purpose: This research looked into debate on the possible impact of human capital on economic growth in Sub-Saharan Africa (SSA) and considers two alternative measures of human capital: health and education.
 Methodology: The research used a dynamic model based on the system generalized method of moments (SGMM) and analysed a balanced panel data covering 35 countries from 1986–2018. The research used Microsoft excel to record all the data gotten from the world indicator data base from world bank, penn world table data base and CANA database. The analysis was presented in a tabular form.
 Findings: This study found that human capital has an overall positive and statistically significant impact on economic growth in the SSA region, although, democracy has a negative and statistically significant impact on economic growth in the region. This finding shows the importance of both measures of human capital and aligns with the argument in the literature that neither education nor health is a perfect substitute for the other as a measure of human capital.
 Unique contribution to theory, practice and policy:Generally, the finding emphasised that both education and health measures of human capital are important, and that policymakers must consider the level of economic development while formulating policies that can enhance the impact of human capital on economic growth in the Sub-Saharan Africa region.

The Effect of Private and Public Health Expenditure on Economic Growth in Sub-Saharan Africa

This study examined the relationship between health expenditure and economic growth in sub-Saharan Africa. The General Method of Moments (GMM) estimation technique was used and the data covered the period 2000-2019 for forty-six countries. The results of the difference GMM-1 and GMM-2 steps indicate that a 1% change in public health expenditure per capita (LPUHE_PC) is associated with a 0.1362% and 0.1521% rise in GDP per capita (GDP_PC) in the short run. The system GMM-1 and GMM-2 steps indicate that a percentage change in LPUHE_PC is associated with a respective 0.0148% and 0.0109% rise in GDP_PC in the short run at a 1% level of significance, on average ceteris paribus. In the long run, the difference GMM-2 step indicates that a 1% change in the LPUHE_PC has a larger positive effect on the GDP_PC (1.34899%) than in the short-run (0.1521%). The result of the system GMM-1 and GMM-2 step indicates that a 1% change in LPUHE_PC has a larger positive effect on the GDP_PC in the long run (0.39967% and 0.24135%) than in the short-run (0.0148% and 0.0109%) respectively. This analysis indicates that a rise in government health spending will stimulate economic growth with a larger effect in the long run than in the short run in Sub-Saharan Africa. Thus, the government should increase health budgetary allocations.

Can the resource curse be avoided? An empirical examination of the nexus between crude oil price and economic growth.

This paper revisits the resource curse hypothesis by examining the nexus between crude oil price and economic growth for a panel of 32 Sub-Saharan Africa countries from 1980 to 2017. Employing the panel vector autoregression (VAR) estimation technique, we found evidence of a significant positive effect of crude oil price on economic growth both in the short run and long run. However, after splitting the panel into net oil exporters and importers, the results for net oil importers remain consistent with those obtained for the whole panel, unlike those for net oil exporters revealing a positive and negative effect of crude oil price on economic growth in the short-run and long-run periods, respectively. This confirms the resource curse hypothesis for oil-exporting countries under consideration. Moreover, we found evidence of bidirectional causality between crude oil price and real GDP. Consequently, to boost economic growth in Sub-Saharan Africa, various governments should encourage economic diversification, increase investments in human capital in view of enhancing the development of the oil sector by ensuring an efficient management of oil revenues, as well as intensifying the fight against corruption.Supplementary InformationThe online version contains supplementary material available at 10.1007/s43546-021-00179-x.

The asymmetric effect of internet access on economic growth in sub-Saharan Africa

This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008–2018. The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen’s threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.

Differential Impact on Economic Development

Why are some countries wealthier than others? There are numerous ways to address this question; however, there is substantial literature in development economics suggesting that a nation’s colonial history plays an integral part in pre-determining who is rich, and who is poor. Previous studies suggest that among former African colonies, British or French colonies experienced marginally faster growth rates than Portuguese, Belgian, or Italian ones. This provides additional insight to suggest that differentiation in economic growth could be explained by a nation’s colonial history. This study attempts to understand the differential impacts of British and French colonialism on the economic growth in sub-Saharan Africa. By investigating the different approaches to colonizing, is it possible that one of these previous imperial powers better equipped their colonies with formidable institutions conducive for economic growth after independence?

Linkage between alcohol consumption and economic growth in sub-Saharan Africa: Linear effect, threshold effect, or both?

This paper contributes to the literature on the relationship between alcohol consumption and economic growth. Despite growing attention on the topic, existing studies have demonstrated the existence of a threshold beyond which alcohol consumption leads to disease, negatively influences professions such as driving and leads to death. However, the threshold literature has not yet explored the nonlinear relationship between alcohol consumption and economic growth. The per capita alcohol consumption expenditure is used to capture the alcohol variable. The empirical evidence is based on the Pooled Mean Group (PMG) and System Generalized Method of Moments (GMM) with a 32 sub-Saharan African countries dataset over the period 2000-2016. The empirical evidence indicates that alcohol consumption fosters economic growth in sub-Saharan African countries. Moreover, the results show that an alcohol consumption threshold exists below which greater alcohol consumption has beneficial effects on economic growth and above which the alcohol consumption has a perverse effect on economic growth. This result materializes the existence of an inverted U-shape (Laffer Curve of alcohol). Therefore, Sub-Saharan African countries must control the level of alcohol consumption of their citizens in order not only to protect them against alcohol diseases but also to ensure sustainable growth.

Relationship between financial inclusion, banking stability and economic growth: a dynamic panel approach

PurposeThe purpose of this paper is to analyse the relationship between financial inclusion, banking stability and economic growth in sub-Saharan African countries given the interconnectedness between them. Globally, financial inclusion has gained recognition as a critical channel for promoting economic growth by bringing a large proportion of the unbanked population into the formal financial system. This cannot be achieved exclusive of the banking sector.Design/methodology/approachThis paper focussed on 18 countries in sub-Saharan Africa. Data on financial inclusion and the economy were obtained from the World Bank, and bank soundness indicators data were also obtained from International Monetary Fund covering the 11-year period from 2008 through 2018. Panel system generalised method of moments is employed for the regression analysis because it has the capability to produce unbiased and consistent results even if there is endogeneity in the model.FindingsThe results show that economic growth drives banking stability and not vice versa; confirming a unidirectional causality from gross domestic product to banking stability. So, this study finds support for the demand-following hypothesis. The paper further observed that financial inclusion positively and significantly influences the stability of banks and economic growth. The study established that bank capital regulation negatively influences banking stability in sub-Saharan African countries.Research limitations/implicationsThis study does not capture the unique country-specific relationship.Practical implicationsThe policy implication is that policymakers in sub-Saharan African countries should focus on growth-enhancing policies that improve the level of financial inclusion. The central banks in sub-Saharan African countries should take advantage of the positive effect of financial inclusion to develop regulatory frameworks and policies that make it attractive for banks to continue to expand their operations to the unbanked.Originality/valueThis is, as far as the authors know, the explanation of the interconnection of financial inclusion, banking stability and economic growth in sub-Saharan Africa.

Economic growth in Sub-Saharan Africa, 1885–2008: Evidence from eight countries

Sub-Saharan Africa (SSA) has been absent from recent debates about comparative long-run growth owing to the lack of data on aggregate economic performance before 1950. This paper provides estimates of GDP per capita on an annual basis for eight Anglophone African economies for the period since 1885, raising new questions about previous characterizations of the region's economic performance. The new data show that many of these economies had levels of per capita income which were above subsistence by the early twentieth century, on a par with the largest economies in Asia until the 1980s. However, overall improvements in GDP per capita were limited by episodes of negative growth or “shrinking”, the scale and scope of which can be measured through annual data.

DEPENSES MILITAIRES ET ACTIVITES ECONOMIQUES EN AFRIQUE SUB-SAHARIENNE

This paper analyses the relationship between military spending and economic growth in Sub-Saharan Africa. In addition, the paper calculates the contributions of military spending on variables related to the economic attractiveness of developing countries in Sub-Saharan Africa. The analysis carried out using a vector autoregression model in panel data and over the period 1995 to 2015, reveals a unidirectional relationship from economic growth to military spending. The results also show that military spending has no effect on foreign direct investment and financial flows of tourism. On the other hand, the latter influence the level of military spending. The absurdity of this situation is that military spending is a major drain on economic activity. As a recommendation, the article proposes as solutions, the professionalization of armies, the quality of human resources enrolled in the arms profession, added to institutional quality to enable military spending to sustain economic growth.

“DELIVER AFRICA FROM DEBTS”: Good Governance Alone is not Enough to Save the Continent From Debt Onslaught

The present article analyzes the debt–economic growth nexus in African countries while controlling for the impact of good governance indicators. In contrast to a long tradition of scholarship that has consistently suggested that government debt has a detrimental impact on economic growth in sub‐Saharan Africa, recent studies have actually shown that government debt, when coupled with improvements in the quality of government, is actually a driver of economic growth. By analyzing an original dataset that covers the 2002–15 period and additional debt–economic growth data going up to the year 2020, we are able to suggest three conclusions. First, in the absence of debt, good governance matters in improving economic growth. Second, some dimensions of governance are better predictors of economic performance than others—as the “good enough governance” literature has in recent years suggested. Third, under no circumstances is debt government growth beneficial for the economic performance of African countries. Building on this evidence, we suggest that the COVID‐19 pandemic—which has already slowed down African economies and increased their debt exposure—may prevent African countries from making greater progress along the developmental path.

Government Expenditure and Economic Growth in Sub-Saharan Africa

The paper sought to investigate the effect government expenditure on economic growth in Sub-Saharan Africa using a panel data for 35 Sub-Saharan African countries for the period 2006-2018. The paper adopted dynamic panel data and estimates were achieved by using two-step system GMM while taking into account the problem of instrument proliferation. The paper provided evidence that education and health expenditure are key determinants of income growth for SSA. The impact of education spending on cross-country income variation is more effective in low income SSA countries than the middle income SSA countries. However, military expenditure on output growth is more effective in improving income level of middle income SSA countries than low income SSA countries. SSA countries should allocate more funding towards education sector and should also avail compulsory and free primary and secondary education. SSA should carry out health reforms which improve primary health and universal health insurance coverage.

Modelling the financial intermediation function of banks and economic growth in sub-Saharan Africa

PurposeThe purpose of this study is to investigate the effect of financial intermediation functions of banks on economic growth in sub-Saharan Africa.Design/methodology/approachThe study employs data from 11 sub-Saharan African countries over the period 1970–2016. Using broad money supply, bank credit to the private sector and bank deposits as financial intermediation measures, the authors apply the random effects (RE) technique based on the recommendation of the Breusch–Pagan test.FindingsThe results show that except for bank deposits, broad money supply and bank credit to the private sector significantly influence economic growth. While broad money has a negative relationship with growth, bank credit to the private sector and bank deposits are positively correlated with economic growth.Originality/valueThe relationship between financial intermediation and economic growth remains unsettled, as results vary across countries. Besides, in developing countries' perspective, extant studies are largely focused on individual countries to investigate the financial intermediation-growth nexus. In this study, the authors take a different direction by employing a panel approach and thus adding to the few cross-country studies on the subject matter. Also, unlike other studies that have focused on a single indicator of financial intermediation, this study uses three indicators of financial intermediation which broadly reflect the intermediation functions of banks.

The Effect of China's investment on the Business Environment and Economic Growth of Sub-Saharan Africa in perspective of Belt and Road Initiative

The Effect of China's investment on the Business Environment and Economic Growth of Sub-Saharan Africa in perspective of Belt and Road Initiative

Renewable energy, CO2 emissions and economic growth in sub-Saharan Africa: Does institutional quality matter?

Renewable energy appears to be the most optimal alternative to fossil fuel and the widely accepted pathway towards the mitigation of climate change. However, the costs of adopting renewable energy are high, and it appears the wealth of nations, the stages of economic development and growth and institutional willingness and quality are important in winning this global challenge. However, there is limited information on the interplay of all the factors that are perceived as critical in moving the world towards the use of renewable energy sources to meet most of the domestic and industrial energy needs. This study investigates the inter-temporal causal relationship between institutions, renewable energy, carbon emissions and economic growth for 45 sub-Saharan Africa countries using annual data for the period 1960–2017. We used the generalised method of moment panel vector autoregression (GMM-PVAR) technique to explore the linkages. From a general perspective, the results reveal that no causal relationship exists between institutions and economic growth, but a bidirectional causality exists between economic growth and renewable energy. Our results indicate that economic growth causes carbon emissions, and institutions are more likely to respond to carbon emissions and renewable energy but prompts no causality exists between carbon emissions and renewable energy. Interestingly, these results differ between countries with different institutional origin. The policy implications are discussed.

Sustaining Economic Growth in Sub-Saharan Africa: Do FDI Inflows and External Debt Count?

The quest for the attainment of economic development is sought after by all global economies, which by effect is expected to transcend to improving livelihoods and standard of living. However, several factors hinder the process of achieving sustained economic development, especially in developing countries. In this regard, assessing the extent of economic expansion orchestrated by foreign direct investment (FDI) inflows in vulnerable economies such as Sub-Saharan Africa (SSA), particularly in the face of the significant fall in global FDI inflow, is worthwhile. In essence, this study ascertains the impact of FDI inflows and external debt on economic growth amidst decline in FDI inflows and excessive foreign borrowings. The mixed order of integration from the stationarity test underpins the adoption of autoregressive distributed lag (ARDL) approach for data covering the period 1990 to 2018. The empirical results found FDI inflows play a crucial role in achieving economic expansion in the region. On average, FDI inflows, external debt, and foreign aids are more useful in expanding the economy compared to trade openness and exchange rate. Thus, this study recommends the need for SSA to open its economic borders for external capital, viz. FDI. A peaceful economic and political environment is a pre-condition to attract and maintain potential foreign investors. Stability in exchange rates is critical in achieving growth in FDI and other foreign resources. However, caution is required, especially in administration of external resources. Particularly, contracting external debt must strictly be driven by economic reasons rather than political motivation. Borrowed funds could be injected mainly into productive streams with the highest investment returns to boost economic development.

Effect of health outcome on economic growth in sub-Saharan Africa: a system generalized method of moment approach

PurposeSome progress have been made over time in improving health conditions in Sub-Saharan Africa (SSA). There are, however, contradicting reports on the relationship between health outcomes and economic growth in the region. The paper aimed at assessing the effect of health outcome on economic growth in SSA.Design/methodology/approachData for 41 countries from 2000 to 2018 were obtained from WDI and WGI and analyzed using system generalized method of moment (sGMM) which is appropriate for the present scenario. AR(1) and AR(2) tests were used to assess the validity of the model while Sargan and Hansen tests were adopted to examine the validity of the instrumental variables. The robustness of the estimation was confirmed using the pooled OLS and fixed effect regression.FindingsHealth outcome (proxied by life expectancy), lagged GDP per capita, capital formation, labor force (LF), health expenditure (HE), foreign direct investment (FDI) and trade openness (TOP) significantly affected economic growth emphasizing the importance of health in the process of economic growth in the region. AR(1) and AR(2) tests for serial correlation and Sargan/Hansen tests confirmed the validity of the estimated model and the instrumental variables respectively. Robustness of the GMM results was established from the pooled OLS and the fixed effect model results.Social implicationsImprovement in the national health system possibly through the widespread adoption of National Health Insurance, increase government spending on healthcare alongside increased beneficial trade and ease of doing business to facilitate investment were recommended to enhance.Originality/valueThe study used up-to-date data with appropriate methodology.

EFFECT OF TRADE OPENNESS ON ECONOMIC GROWTH IN SUB-SAHARAN AFRICA: DYNAMIC PANEL ANALYSIS

Theoretically, proponents of traditional trade theories argue that trade openness can enhance economic growth by providing access to goods and services, achieving efficiency in allocation of resources through comparative advantage, creation of employment opportunities and generation of capital that leads to better living standards in terms of higher level of GDP per capita,trade openness may strengthen economic growth through different channels such as efficient allocation of resources. However, owing to the fact that there are limited studies on trade openness, various studies indicate divergent views on the effect of trade openness on economic growth. For this reason, it is not clear whether or not trade openness affect economic growth in Sub-Saharan Africa. The main objective of this study was to investigate the effect of trade openness on economic growth in Sub-Saharan Africa. Control variables used in the regression included oversees development assistance, population growth rate, domestic credit and foreign direct investment. Trade openness, inflation and capital stock were explanatory variables and economic growth the dependent variable. This study was modeled using the Neoclassical Growth theory. One- step difference Generalized Method of Moments results revealed that trade openness had a positive and significant effect on economic growth, capital stock positive and insignificant relationship, while inflation had positive and insignificant relationship with economic growth in SSA.The study thus recommends that there is a need for improving balance of trade by increasing exports diversification and balanced growth and the policy makers of SSA countries should have to give a priority for trade and investment policies which requires some reforms to adjust with changing economic environment. The study concluded that extra-regional trade spurs higher output than intra-regional trade. This may be due to lack of efficiency in the implementation of trade agreements among the intra-regional constituent countries such as Sub-Saharan African countries and lack of full commitment by the member states governments to trade more intensively. KEYWORDS: Trade openness, economic growth, Sub-Saharan Africa

Domestic Investment, Foreign Direct Investment, and Economic Growth in Sub-Saharan Africa: A Case of Industrial Investment in Cameroon

This study empirically examines the impact of Domestic Investment (DI) and Foreign Direct Investment (FDI) on the economic development of Cameroon from 1990 to 2018. The four factors investigated include financial development, institution, infrastructure, and social capital. Both the dynamic panel estimate and standing panel lapse methods were used to evaluate the connection between DI and FDI concerning the economic development based on the factors enumerated. The results show that DI has a positive influence on and correlates with the growth of the economy. In addition, it indicated that there is an improvement in the financial progress when FDI is on the increase. Moreover, this study indicates that the increase in the institutions, human capital, and the monetary system improves the economic development of the country. It can be inferred from the results that Cameroon had a significant increase in her infrastructures and school enrolment from 2001 to date because of the increase in DI and FDI. The results show that FDI negatively affects some social capital of the Cameroon people such as the displacement of schools and markets, which is consistent with previous studies and results from the literature reviewed.

Effect of determinants of innovation on economic growth in Sub Saharan Africa

The currently observed incorporation of hidden and non-technological innovations, together with the emergence of the modern day fourth industrial revolution is actually contributing to change in our understanding of innovation and its measured contributions to success in entrepreneurship. This study provides a quantitative longitudinal study of the determinants of innovation, their role in entrepreneurship innovation capacity and how they collectively add value to economic growth in sub-Saharan Africa. The study used fixed effects with country dummies in the analysis where Stata software was used. The empirical results indicated that capital for domestic investment, labour, innovation and foreign direct were positively and significantly correlated with economic growth in SSA. It was concluded that the above variables were positively and significantly correlated with economic growth in SSA. It is recommended that respective countries should put in mechanisms to capitalize from the positive benefits of the above on the economy. This could be through increased investments in tertiary institutions and reduction of bureaucracy and corruption that will not only increase high quality production through increased labour productivity, but will also foster fair competition in the markets. Keywords: entrepreneurship, innovation, economic growth, Sub-Saharan Africa