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Working Paper 130 - Growth and Macroeconomic Convergence in Southern Africa

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    Abstract

    This paper investigates convergence in real per capita GDP and macroeconomic policy and stability indicators within the Southern African Development Community (SADC). Empirical tests for the period 1992-2009 showed no evidence of absolute beta and sigma convergence in real per capita GDP among the SADC economies. Although, absence of convergence does not necessarily imply lack of economic growth, further empirical assessment of possible conditional beta convergence did not reveal any tendency of convergence to own steady states. On an individual level, however, ADF unit root test indicated that Botswana and South Africa’s real per capita GDP converged to a common stochastic trend while the rest were characterized by a boundless drift. With regard to the SADC macroeconomic convergence goals set for 2012, the findings indicate that most of the economies of the member states have shown a tendency of macroeconomic divergence in 2009 in monetary policy, fiscal policy, and foreign exchange reserve ratios. Since member countries are at varied levels of economic development, the goals themselves must be conditional on the level of convergence in economic structure and hence macroeconomic convergence may not be attainable. Furthermore, achieving the targets may be neither necessary nor sufficient to achieve good macroeconomic outcomes.

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    Bibliographic Info

    Paper provided by African Development Bank in its series Working Paper Series with number 314.

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    Date of creation: 23 Jun 2011
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    Handle: RePEc:adb:adbwps:314

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    1. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    2. Amélie Charles & Olivier Darné & Jean-François Hoarau, 2009. "Does the real GDP per capita convergence hold in the Common Market for Eastern and Southern Africa?," Working Papers hal-00422522, HAL.
    3. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
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