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The Determinants of Economic Growth in Africa: A Dynamic Causality and Panel Cointegration Analysis

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  • Sharif Hossain

    ()
    (Department of Accounting and Information Systems, Faculty of Business Studies, University of Dhaka, Dhaka 1000, Bangladesh)

  • Rajarshi Mitra

    ()
    (Faculty of Economics 305, Kyushu University, 6-19-1 Hakozaki, Higashi-ku, Fukuoka-shi 812-8581, Japan)

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    Abstract

    This paper examines the dynamic causal relationships between trade openness, foreign aid, domestic investment, long-term external debt, government spending and economic growth for a panel of 33 highly aid-dependent African countries for the period 1974- 2009. Short-run bidirectional causality is found between economic growth and trade openness. Short-run unidirectional causalities are found from external debt to foreign aid, from trade openness, foreign aid, external debt to domestic investment, from economic growth, trade openness to external debt and also from trade openness to government spending. The long-run effects of trade openness, domestic investment and government spending on economic growth are significantly positive.

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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 43 (2013)
    Issue (Month): 2 (September)
    Pages: 217-226

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    Handle: RePEc:eap:articl:v:43:y:2013:i:2:p:217-226

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    Related research

    Keywords: Unit Root Test; Panel Cointegration; Granger Causality;

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    1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    2. Burke, Paul J. & Ahmadi-Esfahani, Fredoun Z., 2006. "Aid and growth: A study of South East Asia," Journal of Asian Economics, Elsevier, vol. 17(2), pages 350-362, April.
    3. John Loizides & George Vamvoukas, 2005. "Government expenditure and economic growth: Evidence from trivariate causality testing," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 125-152, May.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Nyoni, Timothy S., 1998. "Foreign Aid and Economic Performance in Tanzania," World Development, Elsevier, vol. 26(7), pages 1235-1240, July.
    6. Neil Foster, 2008. "The Impact of Trade Liberalisation on Economic Growth: Evidence from a Quantile Regression Analysis," Kyklos, Wiley Blackwell, vol. 61(4), pages 543-567, November.
    7. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
    8. Kazem Yavari & Reza Mohseni, 2012. "Trade liberalization and economic growth: a case study of Iran," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 15(1), pages 13-23, March.
    9. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    10. Vasudeva Murthy & Victor Ukpolo & John Mbaku, 1994. "Foreign aid and economic growth in Cameroon: evidence from cointegration tests," Applied Economics Letters, Taylor & Francis Journals, vol. 1(10), pages 161-163.
    11. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    12. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
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