Structural transformation and its relevance for economic growth in Sub‐Saharan Africa

In this paper, we analyze the role of structural transformation in view of the remarkable growth performance of Sub‐Saharan African countries since the late 1990s. Our analysis covers 41 African countries over the period 1980 to 2014 and accounts for structural transformation by employing the analytical frameworks of (1) growth decomposition and (2) growth regression. Even though the low‐productive agricultural sector continues to employ most of the African workforce, our results reveal that structural transformation has taken place and that it has contributed significantly to African growth in the period 1980‐2014.     

The effects of fragility and financial inequalities on inclusive growth in African countries

Africa has the largest number and proportion of fragile states in the world. Fragile states are characterized by slower economic growth, higher incidences of poverty, and persistent inequality. Thus, there is a circular relationship between fragility, inequality, and slow economic growth. This study examines the relationship between fragility, financial inequalities, and inclusive growth in African countries. We introduce a novel way of examining inclusive growth in African countries by developing a unified measure of inclusive growth that captures the two dimensions of inclusive growth: income growth and income distribution. This enables us to adequately assess not just increased opportunities arising from economic growth, but also see how those new opportunities are distributed across all segments of the population. We captured the fragile status of African countries by using an index of fragility. We measured financial inequalities using new data on financial inclusion. The data analysis suggested negative relationships between fragility and inclusive growth in African countries. In addition, the results suggest positive relationships between financial inclusion and inclusive growth. Thus, inclusive growth can be fostered through policies that reduce financial inequalities. Therefore, a less fragile environment is conducive to inclusive growth both directly and indirectly through financial inclusion.     

The dynamics of financial development,globalisation, economic growth and life expectancy in sub‐Saharan Africa

The importance of life expectancy is recognised in the development economics literature because of its increasing effects on labour productivity and economic growth in long‐run. However, no published study to date empirically examines the nonlinear relationships between globalisation, financial development, economic growth and life expectancy in sub‐Saharan African (SSA) countries. Therefore, our study intends to fill this gap by using non‐parametric cointegration test and multivariate Granger causality test towards a non‐linear empirical understanding of the factors affecting the life expectancy. We consider the case of 16 sub‐Saharan African economies using annual data over the period 1970–2012. The empirical analysis indicates that financial development, globalisation and economic growth appear to have a positive impact upon life expectancy in sub‐Saharan African economies, except for Gabon and Togo. Our empirical findings may provide insightful policy implications towards improving population health conditions which are vital for promoting the productivity of labour force and long‐run economic growth in sub‐Saharan African countries. In light of these policy implications, governments should incorporate globalisation, financial development and economic growth as key economic instruments in formulating sustainable developmental policy to promote life expectancy for the people in sub‐Saharan African countries.     

Does Africa grow slower than Asia,Latin America and the Middle East? Evidence from a new data-based classification method

We address the question whether sub-Saharan African countries have lower average growth rates in real GDP per capita than countries in Asia, Latin and Middle America and the Middle East. In contrast to previous studies, countries are no a priori assigned to clusters based on geographical location. Instead, we propose a latent-class panel time series model, which allows a data-based classification of countries into clusters such that within a cluster countries have the same average growth rate. Our empirical results suggest that three clusters are sufficient to describe the different growth paths. Twenty-six African countries belong to the low growth cluster, but 8 African countries show growth rates comparable with many countries in Asia, Latin and Middle America and the Middle East.     

The growth effect of trade openness on African countries: Evidence from using an instrumental variable panel smooth transition model

This paper assesses the relationship between trade openness and economic growth in Africa by accounting for the heterogeneity of African countries. In addition, the paper contributes to the literature on trade openness and economic growth nexus by applying the instrumental variable panel smooth transition regression, a methodology that accounts for nonlinearity and endogeneity in the relationship between the two variables. The results of the empirical analysis reveal that the investment ratio is a channel through which trade openness affects economic growth in the African continent. In addition, the relationship between trade openness and economic growth varies according to the degree of a country's development in Africa. The study finds a negative relationship between openness and growth in low-income countries. Conversely, for upper-income countries, the coefficients of trade indicators are positive and statistically significant. The results indicate that African countries are not homogeneous, especially concerning trade openness and economic growth nexus.     

Export composition and growth of selected low-income African countries: evidence from time-series data

This paper examines the hypothesis that economic growth is linked to export composition with the use of time-series data for some low-income African countries. On the basis of the regression results, the study supports the hypothesis of a positive linkage between the growth of non-fuel primary exports and growth. However, the results cast some doubt on the significance of the positive contribution of the manufactured exports sector to the growth process of the low-income African countries.     

Nonlinearity and the Unit Root Hypothesis for African Per Capita Real GDP

Once described as an epic center of growth tragedy, African nations have lately achieved relatively rapid growth rates, which have raised hopes that the continent is finally on the path to economic convergence with other emerging economies. However, there is a need to establish whether stabilization policies for the purpose of enhancing the GDP are effective in African countries. One of the means of examining the effectiveness of these policies is through the investigation of the unit root properties of per capita GDP in the continent. This study aims to add to the existing papers on GDP in African countries by investigating the non-stationarity of per capita GDP in 52 African countries, while using a newly proposed nonlinear unit root test. The results suggest that per capita GDP follows the non-stationarity process in half of the entire sample.     

Does Latin America Have More to Gain From Exchange Rate Liberalization than Sub-Saharan Africa?

An examination of the relationship between exchange rate liberalization and economic growth in selected Latin American and Sub-Saharan African countries reveals evidence of a short-run causal relationship between the two variables in both Latin America and Sub-Saharan Africa. Within each region, exchange rate liberalization causes growth in some countries while others exhibit reverse causality running from growth to exchange rate leads to increased growth and growth induces exchange rate liberalization in most Latin American countries, in the majority of Sub-Saharan African countries studied, exchange rate liberalization reduces growth while growth causes distortions in the exchange rate. Market imperfections, expansionary fiscal and monetary policies under a fixed exchange rate regime, and poor terms of trade are cited as possible explanations for the findings for Sub-Saharan Africa. [F, O]     

Africa is on time

We present evidence that the recent African growth renaissance has reached Africa’s poor. Using survey data on African income distributions and national accounts GDP, we estimate income distributions, poverty rates, and inequality indices for African countries for the period 1990–2011. We show that: (1) African poverty is falling rapidly; (2) the African countries for which good inequality data exists are set to reach the Millennium Development Goal (MDG) poverty target on time. The entire continent except for the Democratic Republic of Congo (DRC) will reach the MDG in 2014, one year in advance, and adding the DRC will delay the MDG until 2018; (3) the growth spurt that began in 1995, if anything, decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.     

Competition and productivity growth in South Africa

This article shows that mark‐ups are significantly higher in South African manufacturing industries than they are in corresponding industries worldwide. We test for the consequences of this low‐level of product market competition on productivity growth. The results of the paper are that high mark‐ups have a large negative impact on productivity growth in South African manufacturing industry. Our results are robust to three different data sources, two alternative measures of productivity growth, and three distinct measures of the mark‐up. Controlling for potential endogeneity of regressors does not eliminate the findings.     

FDI,Foreign Aid,Remittance and Economic Growth in Developing Countries

Using a dynamic spatial framework, this paper investigates how foreign direct investment (FDI), foreign aid and remittances impact the economic growth of 53 African and 34 Latin American and Caribbean countries. Previous growth studies examine how one factor or two of these factors impacts economic growth, which results in biased estimation because of the omitted variable(s). Separate estimation shows foreign aid and FDI affects economic growth in Africa, but when we control for all three factors, only FDI affects African economic growth. For Latin America and the Caribbean, foreign aid and remittances affect growth when estimated separately, while remittances affect growth when they are estimated simultaneously. Finally, both regions' results confirm spatial interdependence is important in explaining economic growth, as growth in one country depends on the growth of its neighboring countries.     

Business cycle synchronization and African monetary union: A wavelet analysis

In this paper, we analyze the feasibility of an African monetary union based on the necessary condition of business cycle synchronization. In this regard, we examine the synchronization of growth cycles between five Regional Economic Communities (RECs) that will have to merge to form an African monetary union: the East African Community; the Economic Community of Central African States; the Economic Community of West African States; the Southern African Development Community; and the Arab Maghreb Union. To do this, we use a new continuous wavelet approach. Results show evidence of heterogeneous synchronization across time and horizons between the RECs. Controlling for the influence of some countries' membership in several RECs at the same time, the synchronization landscape does not improve. Overall, our results suggest that business cycle synchronization across the RECs has not yet reached a sufficient level to allow African countries to benefit from a common monetary policy.     

Impact of foreign direct investments on economic growth in Africa: Evidence from three decades of panel data analyses

This paper examines the impact of foreign direct investment (FDI) on economic growth in Africa and presents estimations based on panel data of 50 African countries during the period from 1980 to 2009, and the system generalized method of moment (SYS-GMM) estimators as proposed by Blundell and Bond (1998). It finds that FDI inflows had a significant impact on economic growth in the African region during the period of interest. It also finds that while the low level of human resources did not limit the impact of FDI, and that the impact of FDI on economic growth was negative during the period from 1980 to 1994 and positive during the period from 1995 to 2009.     

African elephants: the effect of property rights and political stability

African elephant populations have declined by more than 50% over the past 20 years. International outrage over the slaughter led to a worldwide ban on ivory sales beginning in 1989, despite the objections of many economists and scientists, and of several southern African countries that have established systems of property rights over elephants. Far from declining, elephant populations in many of these countries have increased to levels at or above the carrying capacity of the ecosystem. This article estimates the determinants of changes in elephant populations in 35 African countries over several time periods. The authors find that, controlling for other factors, countries with property rights systems of community wildlife programs have more rapid elephant population growth rates than do those countries that do not. Political instability and the absence of representative governments significantly lower elephant growth rates.     

Financial market development,global financial crisis and economic growth: evidence from developing nations

Emerging and frontier markets in Africa have witnessed various economic and financial reforms aimed at integrating the domestic markets into the global financial market to attract investment. Whether these reforms promote high economic growth remains inconclusive. The paper applies the pooled mean group estimation technique to empirically re-investigate the link between financial market development, global financial crisis, and economic growth in selected African economies. The results strongly support our hypotheses that stock market and banking sector development promotes economic growth in the selected countries. Moreover, financial crisis reduce the positive effects of both the stock market and banking sector developments on economic growth. The study suggests that both the banking sector and stock market are important to deliver the long-run economic growth that the African region desired. Moreover, effort should be made to enact policy measures that would ensure development of the stock market which has received inadequate attention.     

The impact of Africa‐China's diplomatic visits on bilateral trade

This article documents that African leaders’ state visits to China could stimulate China's exports to Africa in capital intensive manufacturing goods. We further find that state visits significantly increase official aid and exports by state‐owned enterprises to African countries which contribute to the trade growth after state visits.     

How Significant Is Sub‐Saharan Africa's Demographic Dividend for Its Future Growth and Poverty Reduction?

Sub‐Saharan Africa will be undergoing substantial demographic changes over the next 15 years with the rising working‐age share of its population. The opportunity of African countries to convert these changes into demographic dividends for growth and poverty reduction will depend on several factors. The outlook will likely be good if African countries can continue the gains already made under better institutions and policies, particularly those affecting the productivity of labor, such as educational outcomes. If African countries can continue to build on the hard‐won development gains, the demographic dividend could account for 11–15% of gross domestic product (GDP) volume growth by 2030, while accounting for 40–60 million fewer poor in 2030. The gains can become more substantial with better educational outcomes that allow African countries to catch up to other developing countries. If the skill share of Africa's labor supply doubles because of improvements in educational attainment, from 25 to about 50% between 2011 and 2030, then the demographic dividends can expand the regional economy additionally by 22% by 2030 relative to the base case and reduce poverty by an additional 51 million people.     

Temperature,rainfall and economic growth in Africa

Following a recent line of research, this paper investigates the aggregated effects of temperature and rainfall on economic growth in Africa. Our econometric approach is based on a reduced-form model and takes account explicitly of parameter heterogeneity and cross section dependence, relying on ARDL modelling and panel estimators with multifactor structures. We find clear supportive evidence of short- and long-run relations between temperature and per-capita GDP growth, while the role played by rainfall appears to be less important and the evidence on its statistical significance is less clear-cut. Very similar results are reported when the analysis is carried out by focusing solely on Sub-Saharan African countries or considering GDP growth per worker. This evidence is in sharp contrast to the results obtained via standard MG estimation and this confirms that, by not controlling for cross section dependence, traditional panel estimators are likely to provide misleading inference. The empirical results suggest that, far from adapting quickly to weather shocks, African economies appear to be significantly damaged by them. In the absence of corrective measures, the current trends in climate change may impose a progressively heavier burden on African countries.     

Keynes versus Wagner: public expenditure and national income for three African countries

The public expenditure/income hypothesis has long been debated in economics. Following Keynes, public expenditure is seen as an exogenous factor to be used as a policy instrument to influence growth. On the other hand, Wagner argues that expenditure is an endogenous factor or an outcome, not a cause, of growth in national income. The purpose of this paper is to apply both the Granger and Holmes-Hutton statistical procedures to test the income-expenditure hypothesis for three African countries-Ghana, Kenya and South Africa. We find that the hypothesis of public expenditure causing national income is not supported by the data for these African countries.     

Schumpeterian and semi‐endogenous productivity growth explanations

This paper examines the nature and sources of productivity growth in South African manufacturing sectors, from an international comparative perspective. On panel data estimations, we find that the evidence tends to support Schumpeterian explanations of productivity growth for a panel of countries including both developed and developing countries, and a panel of South African manufacturing sectors. By contrast, semi‐endogenous productivity growth is supported for a panel of OECD (Organisation for Economic Cooperation and Development) manufacturing sectors. However, we also report evidence that suggests that sectors are not homogeneous. For this reason, time series evidence may be more reliable than panel data. Time series evidence for South Africa suggests that prospects for the sustained productivity growth associated with Schumpeterian innovation processes, is restricted to a narrow set of sectors. For the OECD manufacturing sectors, both semi‐endogenous and Schumpeterian growth finds support. Schumpeterian growth is present for a larger number of sectors than for South Africa, and is most prevalent in the North American economies.