Economic Growth In Sub-Saharan Africa Research Articles

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

Financial Sector Development and Economic Growth in Sub-Saharan Africa: A Dynamic Pool Mean Group Approach

This study examines the effect of financial sector development on economic growth in sub-Saharan African countries using the dynamic pooled mean group estimation approach. The sample comprises six countries; Ghana, Kenya, Mauritius, Namibia, Nigeria and South Africa, while the time-series dimension of the data covers from 1995 to 2019. Our results generally suggest that financial sector development is an important factor for economic growth. However, while financial sector development affects economic growth through money supply in the short run, its long-run impact occurs through stock market performance, gross fixed capital formation and domestic savings. Increase in both credit to private sector ratio to GDP and government expenditure ratio to GDP has no effect on growth in both the short run and long run. Our results show that the selected sub-Saharan economies would converge to their long run equilibrium levels after suffering a shock. Therefore, our results support the view expressed many authors that the impact of financial development on growth depends on how the former is measured.

Impact of Government Expenditure on Economic Growth In Sub-Saharan Africa: A Validity of Wagner’s Law

The study investigated the impact of government expenditure on economic growth with special inclination to testing the Wagner’s law in Sub Saharan Africa between 1986 and 2018. Adopting the Panel first generation tests as well as the Panel Auto Regressive Distributed Lag (ARDL) and Pairwise Causality techniques, it was revealed that government expenditure causes economic growth rendering the Wagner’s law is invalid in the Sub-Saharan region. Also, it was further discovered that capital and recurrent expenditure exert negative effect on economic growth while total expenditure has positive effect on economic growth in the region. Therefore, based on the negativity of capital and recurrent expenditure, it is recommended that capital and recurrent expenditure must be monitored effectively to ensure that its increase will not exert any negative effect on economic growth while stringent measures as well as checks and balances must be adopted to curb corruption in Sub-Saharan Africa to ensure that funds are used exclusively for their intended purposes especially those pertaining to capital projects.

Trade openness, institutions and economic growth in Sub-Saharan Africa

This research investigates the interactive effect of trade openness and the institutional quality on economic growth in sub-Sahara Africa. The sample consists of 38 sub-Saharan African countries and covers the period 1986-2015. Pooled OLS, fixed effect, and Dynamic GMM were used as estimation techniques. The empirical section used a nonlinear growth regression specification that interacts trade openness with law and order, bureaucratic quality, corruption, government stability, and democratic accountability. The study found that corruption, government stability, law and order, and bureaucratic quality as institutional quality variables harm economic growth. The interaction of trade openness and institutional quality variables positively impacted economic growth. It is an indication that trade openness better impacted economic growth in the presence of high-quality institutional variables.

Foreign aid volatility and economic growth in Sub-Saharan Africa: Does institutional quality matter?

This paper investigates whether foreign aid volatility affects economic growth in countries with an effective institution. Specifically, we examine the role of institutional quality in aid volatility-growth nexus using data from 45 Sub-Saharan African countries over the period 1980–2017. We account for different aid types, namely, aid commitment and aid disbursement. Our results show that, unlike foreign aid disbursement, foreign aid commitment is growth-enhancing, but aid volatility adversely impacts on economic growth. We find that although institutional quality and its sub-dimensions enhances economic growth, it fails to curtail the adverse effect of aid volatility on economic growth. With regard to aid flows, aid benefits a country only if the donor commits to provide the aid to the recipient country. Exploiting aid flows’ policy implication, the paper further uncovers that promoting an effective institution could enhance aid effectiveness in Sub-Saharan Africa.

Remittances, natural resource rent and economic growth in Sub-Saharan Africa

Despite the established link between oil rent fluctuations and remittances received, its plausible joint effect on economic growth in Sub-Saharan Africa (SSA) remains unexplored. To fill this gap, first we determine whether natural resource rent (composed of oil rent, forest rent and natural gas rent) reduces economic growth in SSA. Second, we examine whether positive macroeconomic signals such as remittances mitigate the negative effect of oil rents on economic growth in a sample of 43 SSA countries spanning 1990-2017. We employ the pooled ordinary least squares, fixed-effects and random-effects, and generalized method of moments. The resulting empirical evidence established are; (1) There is a positive impact of forest rent on economic growth whilst oil rent and natural gas rent have a negative impact on economic growth. (2) There is a positive marginal and net effect on economic growth from the interaction between remittances and oil rent. Also, the unconditional effect of remittances on growth is positive. We further perform a threshold analysis to establish a critical ground that could also influence economic growth positively. This threshold is crucial because above these critical mass remittance inflows mitigate the negative incidence of oil rent on economic growth and below the threshold negative oil rent on growth is completely nullified. This is relevant for policy implications because policy makers are provided with actionable levels of remittances which are easily attainable in sampled countries.

Corporate governance and economic growth in Sub-Saharan Africa

Corporate governance and economic growth in Sub-Saharan Africa

Path to Progress: Sub-Saharan Africa’s Economic Convergence—Learnings for Zambia to Overcome the Middle-Income Trap

Until after the year 2000, there has been limited economic growth in Sub-Saharan Africa. While several countries in this region have attained middle-income status and are among the fastest-growing economies globally, many others have stagnated and risk falling back to low-income level. The paper aims to examine GDP per capita economic convergence of 35 Sub-Saharan countries using a unit root model. Second, we isolate countries showing good GDP per capita convergence and reviewed each country to draw out common successful elements as lessons for Zambia. Only six out of the sampled 35 countries have slightly converged towards the United States of America. From the six countries’ in-depth review, three key success elements come out as recommendations for Zambia. These include 1) Prudent management of mineral resource endowments such as copper and diamonds. Proceeds from mineral wealth should be reserved for use during hard years and to diversify the economy. 2) Strong focus on agricultural mechanization and support to smallholder farmers to ensure complete agrarian transformation. While the share of agriculture is expected to reduce as the economy grows, such a decline should only happen once the secondary sectors are fully developed. 3) Fiscal discipline in government spending, coupled with a free-market economic system, is a key to sustaining Africa’s growth.

The Asymmetric Effect of Internet Access on Economic Growth in Sub-Saharan Africa: Insight from a Dynamic Panel Threshold Regression

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.

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.

Corporate governance and economic growth in sub-Saharan Africa

For decades, the issue of corporate governance and its role in economic growth has attracted global attention from both policy-makers and researchers due to corporate scandals. This study took a deductive approach. Panel data from 13 selected Sub-Saharan African countries from 1996 to 2017 was used to help analyse the relationship through an econometric model in which gross domestic product per capita was the dependent variable while the six dimensions of governance were used as proxies for corporate governance. Foreign direct investment and trade were used as control variables. Accordingly, the results of the regression model show a significant good fit for the data with control of corruption, government effectiveness, regulatory quality and voice and accountability being positive and significant except government effectiveness and regulatory quality that were insignificant. Political stability and rule of law were negative. This article is, however, of great value to researchers, policy-makers, community and investors.

Health expenditure and economic growth in sub-Saharan Africa: an empirical investigation

ABSTRACT In this study, the causal relationship between health expenditure and economic growth is examined using panel data from sub-Saharan African countries for the period 2008–2017. The study decomposes health expenditure into two components: public health expenditure and private health expenditure. In order to establish whether the causal relationship between health expenditure and economic growth depends on a country's level of income, the study divides the studied countries into two groups: low-income countries and middle-income countries. In order to address the omission-of-variable bias, which is associated with some of the previous studies, the study incorporates life expectancy as an intermittent variable between health expenditure and economic growth – thereby creating a system of multivariate equations. Using a panel ECM-based Granger-causality model, the study found that when public expenditure is used as a proxy, a distinct unidirectional causality from health expenditure to economic growth is found to prevail in low-income countries, but no causality is found to exist in middle-income countries. However, when private health expenditure is used, a short-run causality from economic growth to health expenditure is found to prevail in middle-income countries, but no causality is found to exist in low-income countries. Policy implications are discussed.

Exchange rate misalignment, state fragility, and economic growth in sub-Saharan Africa

The sluggish and sometimes negative growth in sub-Saharan Africa has defined the objectives of most studies seeking to explain the sources of its slow growth. I contribute to this inquiry by estima...

Financial development and economic growth in sub-Saharan Africa: A sectoral perspective

Research on the impact of financial development on economic growth remains inconclusive. Previous empirical examination of the link is based on aggregate GDP on the presumption that each economic sector responds identically to financial development. However, the extent of credit utilisation, as well as productivity of credit, may not necessarily remain the same across sectors. This study therefore seeks to contribute to the literature by examining the effect of financial development across sectors in sub-Saharan Africa using the Generalised Method of Moments (GMM) over the period 1990–2018. Indeed, the findings show that while financial development has a positive effect on the service and agricultural sectors, a certain threshold of financial development must be reached before it can positively contribute to the growth of the industrial sector. The findings are robust to a different estimation technique. With the industrial sector considered critical for economic transformation, our findings imply that policymakers in sub-Saharan Africa need to continue to promote financial development to spur industrialization.

Security, Investment and Economic Growth in Sub-Saharan Africa

This paper analyses the relationship between security and economic growth through investment, in 28 countries in Sub-Saharan Africa (SSA). The analysis of this relationship is done using the model of Borensztein et al. (1998) and uses data for the period 1996-2015. Estimation is done by the system generalized method of moments (GMM). The results show that security positively influences the level of economic growth in SSA countries both through domestic investment and Foreign Direct Investment (FDI). The study therefore recommends that policies to support economic growth should incorporate security provisions such as guaranteeing property rights, strengthening the quality of institutions and reducing armed conflict in the area.

Assessing the economic and mitigation benefits of climate-smart agriculture and its implications for political economy: A case study in Southern Africa

Climate change poses a serious risk to the economic growth of sub-Saharan Africa. Sustainable enhancement of resilience and mitigation capacity of small farm households is a major political economy goal. This paper has the objective to assess the on-farm economic and mitigation benefits of climate-smart agriculture production and their cost-effectiveness to be used as a prioritization criterion for policy incentives. An interdisciplinary model which integrates elements of economics and ecological science at farm-scale is developed and applied using a unique dataset for Malawi and Zambia built through household surveys. Results show that switching from conventional to climate-smart farming enhances economic returns more significantly in semi-dry areas than in sub-humid ones. However, high up-front costs hinder technology adoption. Negative abatement costs for most smart farming options indicate synergies between livelihood enhancement and mitigation. Land management based on minimum tillage, crop residues incorporation, use of cover crops, and inclusion of legumes has relatively higher economic returns. Agroforestry provides lower economic returns but the highest emission abatement potential. Payments for mitigation benefits could be a management strategy to incentivize cleaner agriculture production if tailored appropriately. These results strengthen the case for public support to climate-smart agriculture scaling-up within policy and planning strategies.

An analysis of Granger causality between sovereign credit rating and economic growth in Sub-Saharan Africa

Interest in the relationship between credit rating and economic growth is growing as emerging economies increasingly integrate into international financial markets. Without credit ratings, developing economies would not have been able to successfully issue their sovereign bonds to support economic growth. Therefore, this paper examines a causality relationship between Standard & Poor’s long-term foreign currency sovereign credit ratings and economic growth in 19 Sub-Saharan countries over the period from 2003 to 2018. The results of the Granger causality tests show a unidirectional causality from sovereign credit ratings to economic growth, not vice versa. This implies that economic growth is not significant in determining sovereign credit ratings. It can thus be concluded from these findings that sovereign credit ratings are proactive actions by rating agencies that are relevant in determining future economic growth. Thus, investors benefit from utilizing credit ratings to prevent inherent information asymmetry in fundamental economic factors. Therefore, it is important for policy makers to pay attention to sovereign credit ratings when formulating macroeconomic policies.

Spatial-temporal levels, variations and sources of NO2/NOx in the sub-Saharan African city of Accra, Ghana

Background. As the world’s fastest urbanizing region, rapid economic growth in Sub-Saharan Africa (SSA) is raising levels of urban air pollution from diverse local and regional sources. While measurement data are now emerging from SSA on particulate matter pollution, there is limited information on major combustion related gaseous pollutants. We examined the levels, spatial, seasonal, and socioeconomic patterns as well as sources of oxides of nitrogen (NOx: NO2/NO) in Accra, Ghana’s capital and one of SSA’s largest metropolitan cities.Methods. We collected weekly integrated ambient NO2 and NOx samples using OGAWA passive samplers at 150 sites, consisting of a year-long (n=10) and week-long (n=140) averages which included a range of land-uses and emissions sources (traffic, biomass).Results. Annual mean NO2 across all sites was 52 µg/m3. Both NO2 and NOx concentrations were highest between November and February, the ‘Harmattan’ period when local and regional meteorology is altered, with means of 73 and 218 µg/m3, respectively, comparing to 47 and 116 µg/m3 during non-Harmattan period. The mean NO2 and NOx levels were highest at roadside sites (82 and 285 µg/m3), followed by residential (46 and 102 µg/m3) and sub-urban background sites (27 and 67 µg/m3). There was no difference between high-density (i.e. low-income and high biomass use) and low-density (i.e. high-income and low biomass use) residential sites. The overall sample mean NO2/NOx ratio was 0.53, varying from 0.35 at roadside sites to 0.63 at residential sites.Conclusions. Traffic is the most important contribution for NOx in Accra, while contribution from biomass burning shows no difference at high- and low-income neighborhoods. NO2/NOx ratios are significantly lower than in North American, European and East Asian cities, indicating a less oxidative atmospheric condition in Accra, especially among traffic sites. “Harmattan” increases local pollution level significantly, possibly by altering local and regional meteorology conditions.