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Effects of selected macroeconomic determinants on consumption expenditure in Sub-Saharan Africa

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  • Raymond Kofi Adjei
  • Veronika Kajurová

Abstract

This paper investigates the macroeconomic determinants affecting consumption in Sub-Saharan Africa (SSA) using panel data from 2005 to 2018. Fixed effects models and dynamic fixed effects models are developed and analysed. The first model includes panel data for 25 SSA countries, considering consumption, foreign aid, foreign direct investment, international trade, and inflation. The second model incorporates a monetary policy element by adding money market interest rate. From the models derived, the paper reveals an empirical relationship between international trade and consumption, with trade having a negative effect on consumption which points to a different distribution than is expected. The dynamic fixed effects models respectively establish that past consumption has an effect on present consumption and that monetary policy through interest rate is negatively correlated with consumption. The significance of the other determinants is not proven, which could serve as meaningful information to policy makers when deciding about what really matters.

Suggested Citation

  • Raymond Kofi Adjei & Veronika Kajurová, 2022. "Effects of selected macroeconomic determinants on consumption expenditure in Sub-Saharan Africa," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 14(2), pages 167-196.
    • Handle: RePEc:ids:ijsuse:v:14:y:2022:i:2:p:167-196
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