Macroeconomic determinants of economic growth in Africa

The topic of the determinants of economic growth in both developed and developing countries remains an unresolved debate. As such, this paper revisits and offers some empirical evidence on macroeconomic determinants of economic growth among 21 African economies. This study employs Pooled Mean Group estimator on the panel data. Our pooled long-run coefficients indicate that growth rates in exports, government expenditure and gross capital formation have statistically significant positive long-run relationships with economic growth at 1%, 5% and 1% levels of significance, respectively; while broad money is not statistically significant among the countries. However, short-run coefficients and error variances differ across the African countries. We further employ Dumitrescu-Hurlin Granger causality test. Our homogeneous causality evidence shows bidirectional causality between growth in gross capital formation and economic growth among the African countries; while growth in broad money, growth in exports and growth in government expenditure show no direction of causality with economic growth. Nonetheless, heterogeneous causality (HEC) evidence differs across the countries - Lesotho, Algeria, Cameroon and Benin show the most favourable causality results from the macroeconomic variables to economic growth. Furthermore, our HEC results show a bidirectional causality between broad money and economic growth in Rwanda.