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Determinants of Growth in SADC Countries: A Fixed Effect Vector Decomposition Approach

Author

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  • Mduduzi Biyase

    (University of Johannesburg, South Africa,)

  • September Rooderick

    (University of Johannesburg, South Africa,)

Abstract

This paper studies the determinants of economic growth for the Southern African Development Community countries over the period of 1995-2011. A fixed effect vector decomposition estimator (FEVD), which allows the estimation of the coefficient of the time-invariant and account for unobserved heterogeneity is employed to estimate the determinants of economic growth. The analysis also applies a fixed effects two-stage least squares estimator to account for a possible endogeneity bias due to reverse causation between economic growth and government spending or other forms of endogeneity problem. Using the FEVD estimator we find that democracy, education - measured by enrolment rate, government expenditure, foreign direct investment, trade openness have the expected positive impact on economic growth. The results seem to hold fairly well when endogeneity of government spending is taken into account the signs or directions of the above-mentioned estimated coefficients remain in line with our benchmark results

Suggested Citation

  • Mduduzi Biyase & September Rooderick, 2017. "Determinants of Growth in SADC Countries: A Fixed Effect Vector Decomposition Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 746-751.
    • Handle: RePEc:eco:journ1:2017-04-86
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    1. Zwane, Talent & Biyase, Mduduzi & Maleka, Mokgadi & Maluleka, Abelwe, 2020. "Technical Efficiency and Economic Growth in the SADC Region," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 307-324.

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    More about this item

    Keywords

    Endogeneity; Bias; Economic Growth; Unobserved Heterogeneity; Fixed Effect-two Stage Least Squares Fixed Effect Vector Decomposition;
    All these keywords.

    JEL classification:

    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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