Economic Growth In Sub-Saharan African Countries Research Articles

Estimation of the public debt threshold effects on economic growth in sub‐Saharan African countries

AbstractUsing data for 22 sub‐Saharan African (SSA) countries, this paper investigates the effects of public debt on economic growth in SSA countries covering the period 1990–2021. Relying upon the estimation of Panel Smooth Transition Regression and generalized method of moments method, our findings offer strong evidence that public debt nonlinearly impacts economic growth. More specifically, there exists a threshold beyond which public debt exerts a negative effect on growth. These results can be used to formulate economic recommendations that the public authorities could implement to improve public debt management and maintain stable economic growth.

Revisiting the debt–growth nexus in sub-Saharan Africa: fresh evidence from panel nonlinear ARDL approach

PurposeWhile some countries have used debt to drive economic growth, the asymmetric effect on sub-Saharan African (SSA) countries has received little attention in the empirical literature. This paper therefore examines the asymmetric effect of external debts on economic growth.Design/methodology/approachThe panel nonlinear autoregressive distributed lag (NARDL) approach was employed in the study for 29 sub-Saharan African countries from 1990 to 2021. The cross-sectional dependence test was used to determine the presence of cross-sectional dependence, while the second-generation panel unit root tests was used to examine the unit-root properties.FindingsThe empirical results show that external debt has an asymmetric effect on economic growth in both the short and long run. In the long run, a positive shock in external debts of 1% triggers an upturn in economic growth by 0.216% while a negative shock triggers 0.354% decline in economic growth. This implies that the negative shock of external debts has a much stronger impact on economic growth than the positive shock. In the short run, a positive shock in external debts by 1% triggers a decline in economic growth by 0.641%, while a negative shock of 1% triggers a fall in economic growth of 0.170%.Originality/valueThe paper used the NARDL model to examine the asymmetric impact of external debt on the economic growth of SSA countries, which has not been extensively studied. It is recommended that governments in the selected countries in sub-Saharan Africa should drive economic growth by promoting domestic revenue mobilization since external debts impede economic growth.

Foreign Aid and Economic Growth in the Sub-Saharan African Countries

ABSTRACT: Official Development Assistance (ODA) remains an important tool for nurturing economic growth in Sub-Saharan African (SSA) countries. This is evidenced by numerous studies that have investigated the ODA-growth nexus in SSA region. However the existing studies on the relationship between ODA and economic growth is subject to identification issues. More specifically, the issue of distributional heterogeneity has not been given the attention it deserves in this field. In other words, the issue of whether ODA-growth nexus differ among developing nations with different economic growth levels has not been meticulously explored. This study aims to examine the heterogeneous impact of ODA on economic growth across 24 SSA countries over a 38-year period. To achieve this, an attempt is made in this study to investigate how the effect of ODA varies along the conditional economic growth distribution by employing the Moment of Moments Quantile Regression (MM-QR) approach, an approach that is able to capture the diverse effects of ODA across different levels of growth distribution. Moreover, this study explores the role of social infrastructure and institutional quality in shaping this relationship. The results suggest that ODA has a positive impact on economic growth in the SSA region, with a larger positive impact in countries with high levels of economic growth. This finding is key as it underlines the important idea that though ODA positively influence growth, it doesn’t homogeneously affect all nations; but instead, it remarkably enhance it in areas with relatively robust and healthy economic conditions. The study also finds a positive and significant relationship between social infrastructures and institutions quality and economic growth, particularly in the 50th, 75th, and 95th quantiles, thereby highlighting the fact that well-developed social infrastructures and high-quality institutions play a pivotal role in nurturing economic progress, particularly at the mid to higher percentiles of economic development. The inclusion of institutions quality and interaction terms in the model influences the effect of aid on economic growth, with ODA being effective in countries located within the 25th and 50th quantiles. The findings suggest that aid can be strategically used to stimulate economic growth in SSA countries, particularly low-income countries.

Effect of renewable energy on economic growth in sub‐Saharan Africa: Role of institutional quality

AbstractThe development of renewable energy is considered as an important step toward sustainable development. In sub‐Saharan African (SSA) countries, institutional quality can play an essential role in encouraging investment and implementation of policies favoring renewable energy. This paper examines the role of institutional quality in the effect of renewable energy on economic growth across 25 SSA countries from 2002 to 2018. The results from the dynamic panel threshold model reveal a significant threshold effect of institutional quality on the contribution of renewable energy to economic growth. While renewable energy consumption positively contributes to economic growth, its impact is notably amplified when the institutional quality index, set at 0.304, is above the threshold. Our findings remain robust when altering institutional quality indicators. In terms of economic implications, improving overall institutional quality by promoting good political, economic, and institutional governance could significantly increase the contribution of renewable energies to economic growth in SSA countries.

How ICTs Moderate the Effect of Global Value Chains’ Participation on Economic Growth in Sub-Saharan Africa?

Using data from Sub-Saharan African (SSA) countries over the period 1990–2015, this study examines the effects of Global Value Chains’ (GVCs) participation on economic growth by distinguishing participation in upstream, participation in downstream and sectors-based participation. The study also focuses on how the economic growth effect of GVCs’ participation can be affected by the ICTs. The Driscoll and Kraay’ estimation approach applied to the cross-lagged panel model enabled to overcome the cross-sectional dependence, heteroscedasticity, errors’ autocorrelation and reverse causality problems. The generalized method of moments (GMM) is further employed for the robustness check. The findings are robust and indicate that the GVCs’ participation (general, upstream, downstream and sectorial) boosts economic growth in SSA countries. These positive effects hold and are even more intensive when the GVCs’ participation is modulated by the ICTs. Furthermore, the study demonstrates that SSA countries should focus on the downstream GVCs’ participation that is the production and export of the (high technologies) intermediate goods that are essential for the production activities of other GVCs’ stakeholders. For the sectors-based participation, the study seems to show that participation in the services sector promotes more economic growth, followed to some extent by the mining, agriculture and manufacturing sectors.

Human Capital and Economic Growth in Sub Saharan Africa Countries: ARDL and ECM Analysis

The long-run relationship between human capital and economic growth in Sub Saharan African (SSA) countries was examined using An ARDL and ECM cointegration analysis approach. The endogenous and human capital theory posits that human capital accumulated acquired from the education system contributes to economic growth in any economy. Despite many years of huge government expenditure in education, SSA countries appears to experience little or no economic growth. Studies on the long term effects of human capital on economic growth in SSA countries remain few despite a growing body of research in literature. Using data from 37 SSA countries for the year 2000- 2018 an Autoregressive Distributed Lag ARDL and Error Correction Model (ECM) cointegration the study estimated a Dynamic Fixed Effects model (DFE) to examine the long run relationship between human capital and economic growth. The findings revealed that a cointegration relationship exist between human capital and economic growth. Secondary education had a significant but weak positive effect on economic growth in the short run and a weak negative effect on economic growth in the long run. Primary education however, had an insignificant contribution to economic growth both in the short and long run. Physical capital hadsignificant and strong positive effect on economic growth in the short run whilst in the long run it has an insignificant effect. SSA countries interested in enhancing long run term economic growth through human capital should consider promoting access to secondary school enrolment and improving the quality of primary education. The study providedempirical evidence on the short and long run contribution of human capital to economic growth in SSA countries.

Natural Resources, International Commodity Prices and Economic Performance in Sub-Saharan Africa (1990–2019)

Abstract In this paper, we investigate the link between windfall gains and losses of income associated with commodity exports and economic performance in a panel of 45 sub-Saharan African (SSA) countries over the period from 1990 to 2019. Windfall gains and losses of income are measured in terms of fluctuations in a country-specific commodity terms of trade (CTOT) index in which each commodity is weighted by the ratio of exports of that commodity in the country’s gross domestic product (GDP). The CTOT index therefore reflects the commodity export specialisation for individual countries. The data on CTOT are taken from the International Monetary Fund. Additionally, we use changes in real GDP per capita as our SSA economic performance measure. We employ a random coefficient model that yields individual estimates for each of the countries included in the analysis. Our approach is based on the assumption that the effect of windfall gains and losses on real GDP per capita growth varies across different SSA countries. Our main conclusion can be elaborated as follows: first, natural resources have undoubtedly contributed to higher economic growth in SSA countries since 1990. Second, when SSA countries are analytically divided into two groups depending on their commodity export specialisation, we find that resource-rich countries—in particular oil rich—are the best economic growth performers during the observation period. Finally, we find that windfall gains from commodity exports are not significantly associated with increased real GDP per capita growth in most agriculture-exporting countries.

Is export-led growth hypothesis still valid for sub-Saharan African countries? New evidence from panel data analysis

PurposeThis study examines the causal relationship between exports and economic growth in sub-Saharan African (SSA) countries during the period 1980 to 2017. The study also examines whether the causality between these two macroeconomic variables depends on the countries' stage of development as proxied by their per capita income.Design/methodology/approachThe study uses a panel cointegration test and panel Granger-causality model to examine the link between exports and growth. The study also incorporates external debt as an intermittent variable in a bivariate setting between exports and economic growth, thereby creating a dynamic multivariate panel Granger-causality model.FindingsAlthough the study found the existence of a long-run relationship between exports and economic growth, the study failed to find any export-led growth response in both low-income and middle-income countries. Instead, the study found evidence of a bidirectional causality and a neutrality response in middle-income and low-income countries, respectively. The study, therefore, concludes that the benefits of an export-led growth hypothesis may have been oversold, and that the strategy may not be desirable to some low-income developing countries.Practical implicationsThese findings have important policy implications as they indicate that the causality between exports and economic growth in SSA countries varies with the countries' stage of development. Consistent with the contemporary literature, the study cautions low-income SSA countries against over-relying on an export-led growth strategy to achieve a sustained growth path as no causality between exports and economic growth has been found to exist in those countries. Instead, such countries should consider pursuing new growth strategies by building the domestic demand side of their economies alongside their export promotion strategies in order to expand the real sector of their economies. For middle-income countries, the study recommends that both export promotion strategies and pro-growth policies should be intensified as economic growth and exports have been found to reinforce each other in those countries.Originality/valueUnlike the previous studies, the current study disaggregated the full sample of SSA countries into two subsets – one comprising of low-income countries and the other consisting of middle-income countries. In addition, the study uses a multivariate Granger-causality model in order to address the emission-of-variable bias. To our knowledge, this may be the first study of its kind in recent years to examine in detail the causal relationship between exports and economic growth in SSA countries using an ECM-based multivariate panel Granger-causality model.

Financial inclusion: A pathway to economic growth in Sub‐Saharan African economies

AbstractThis study empirically assesses the relationship between financial inclusion and economic growth in Sub‐Saharan African (SSA) countries for the period of 2004–2017, using the generalized method of moments and Dumitrescu–Hurlin's causality test. Based on the multidimensionality of the financial inclusion measures, a principal component analysis was applied to develop a composite index for financial inclusion. The results show that financial inclusion has a significant positive influence on economic growth in SSA countries. Other findings indicate that there is causality running from economic growth to financial inclusion in the short run. Therefore, policymakers should emphasize strategies that foster access to quality and affordable financial services and products, to improve inclusive growth in the continent.

Energy Consumption and Economic Development in Sub-Saharan African Countries: Role of Governance Quality

The objective of this paper is to analyze the role of governance quality on the relationship between economic growth and energy consumption in a panel of twenty (20) sub-Saharan African (SSA) countries over a period from 1996 to 2017. Techniques such as the generalized method of moments (GMM) in dynamics and the Granger test were utilized. The results of the estimations show that energy consumption is an essential factor in the economic growth of SSA countries and that the quality of governance is a catalyst of this relationship. The policy implications of these results are elaborated.

Industrialization and Economic Growth in Sub-Saharan Africa: The Role of Human Capital in Structural Transformation

The objective of this paper is to analyze the impact of the manufacturing sector on economic growth through the role of human capital. Our data cover Sub-Saharan African (SSA) countries from 1990 to 2015. We use fixed effects, random-effects and Hausman-Taylor estimators. We take into account the unobservable characteristics of countries by including fixed effects or random effects in the model. Our results show that the manufacturing sector through its value added has a positive impact on economic growth in SSA countries. In addition, the interacting models show that the quality of human capital is an accelerator of the role of the manufacturing sector. The coefficient of the catch-up term is negative and significant in all models indicating that countries with a larger productivity gap relative to China are developing faster than countries closer to China. This finding is consistent with the convergence effects usually found in growth model estimates, which are either related to convergences towards a stable state or to a catching-up of growth linked to the international diffusion of knowledge.

Effect of the Prevalence of HIV/AIDS and the Life Expectancy Rate on Economic Growth in SSA Countries: Difference GMM Approach.

The productivity of countries around the globe is adversely affected by the health-related problems of their labour force. This study examined the effect of the prevalence of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) and life expectancy on the economic growth of 33 Sub-Saharan African (SSA) countries over a period of 11 years (2002–2012). The study employed a dynamic panel approach as opposed to the static traditional approach utilised in the literature. The dynamic approach became eminent because of the fact that HIV/AIDS is a dynamic variable as its prevalence today depends on the previous years. The result revealed that HIV/AIDS is negatively correlated with economic growth in the region, with a coefficient of 0.014, and significant at the 1% level. That is, a 10% increase in HIV/AIDS prevalence leads to a 0.14% decrease in the GDP of the region. Tackling HIV/AIDS is therefore imperative to the developing Sub-Saharan African region and all hands must be on deck to end the menace globally.

Institutions and economic growth in Sub-Saharan Africa: a panel data analysis

Over the last three decades or so, there has been a considerable debate on factors that explaining economic growth in Sub-Saharan African (SSA) countries. The conventional determinants of economic growth, such as, economic policies, investment in human capital and foreign flow of private capital have been received a great attention in the literature. Nevertheless, the role of institutions in stimulating growth still has not been adequately studied. This study, therefore, aims at investigating the relationship between institutional quality and economic growth in 20 SSA countries over the period 1985–2007. The empirical results show that the institutional quality, in terms of low corruption, rule of law and efficient bureaucratic has positive impact on economic growth in SSA countries. Moreover, the study revealed that the institutional quality in British colonies has a significant impact on growth, while in the case of French colonies the impact is found to be insignificant.