The impact of capital goods prices on Africa's economic performance |
| |
Authors: | B Ben Moummad E Ezzahid A Zoglat |
| |
Institution: | 1. Laboratory of Mathematics, Statistics and Applications, Faculty of Sciences, Mohammed V University in Rabat, Rabat, Morocco;2. Faculty of Juridical, Economic and Social Sciences, Mohammed V University in Rabat, Rabat, Morocco |
| |
Abstract: | Over the last four decades, the relative price of investment goods in Africa has gone through a relatively large decrease, resulting in a steady convergence towards the levels recorded in high-income countries. This fact begs the following question: To what extent might the relative price decrease be a driving force behind the economic performance of this continent? The paper addresses this question from the perspective of a panel ARDL approach, using the Solow growth model—augmented with barriers to investment—as a framework. The results reveal that a one-unit decrease in the relative price of investment leads, in the long term, to a 4% increase in per capita GDP, an increase that could be neutralised by a 6.5 percentage points decrease in the savings rate. The findings contribute to the case for a policy mix that combines policies geared towards reducing investment distortions with those promoting savings mobilisation. |
| |
Keywords: | Africa economic growth investment barriers pooled mean group Solow growth model the relative price of investment goods |
|
|