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What Drives Long-Run Economic Growth? Empirical Evidence from South Africa

Author

Listed:
  • Chirwa, Themba G.

    (Department of Economics, University of South Africa, Pretoria)

  • Odhiambo, Nicholas M.

    (Department of Economics, University of South Africa, Pretoria)

Abstract

In this study, we examine empirically the key determinants of economic growth in South Africa – using the ARDL bounds-testing approach. The paper has been motivated by the low and dwindling economic growth that South Africa has been experiencing in recent years. Our study finds that the key macroeconomic determinants that are significantly associated with economic growth in South Africa include, amongst others, investment, human capital development, population growth, government consumption, inflation, and international trade. The study finds that in the short-run, investment is positively associated with economic growth, while population growth and government consumption are negatively associated with economic growth. However, in the long-run, the study finds investment, human capital development and international trade to be positively associated with economic growth, while population growth, government consumption, and inflation are negatively associated with economic growth. These results have important policy implications. They imply that economic strategies pursued in the short-run should include policies that attract investment, and reduce population growth and government consumption. However, long-run strategies to be adopted should include those that attract long-term investments, improve the quality of education, as well as trade liberalization; and ensure a reduction in population growth, government consumption and inflation. Cosa guida la crescita economica? Evidenze empiriche dal Sud Africa Questo studio esamina empiricamente le determinanti chiavi della crescita economica in Sud Africa utilizzando l’approccio ARDL bounds-testing. La motivazione che ha portato a realizzare questo lavoro è la lenta e altalenante crescita del Sud Africa negli ultimi anni. Secondo i risultati le determinanti chiave macroeconomiche che sono significativamente associate con la crescita economica in Sud Africa includono, tra le altre, gli investimenti, lo sviluppo del capitale umano, la crescita demografica, la spesa pubblica, l’inflazione e il commercio internazionale. L’analisi ha riscontrato che nel breve termine gli investimenti sono positivamente associati alla crescita economica mentre l’aumento demografico e le spesa pubblica sono negativamente associati con la crescita economica. Comunque nel lungo periodo i risultati di questo studio indicano che il capitale umano e il commercio internazionale sono positivamente associati con la crescita mentre l’aumento demografico, la spesa pubblica e l’inflazione sono negativamente associati alla crescita economica. Queste evidenze hanno importanti implicazioni politiche in quanto indicano che le strategie economiche intraprese nel breve periodo dovrebbero includere politiche che attraggano investimenti e, nel contempo, ridurre l’aumento demografico e la spesa pubblica. Inoltre, le strategie di lungo periodo da adottare dovrebbero attrarre investimenti a lungo termine e migliorare la qualità dell’istruzione, così come l’apertura commerciale. Tali strategie dovrebbero anche assicurare la riduzione della crescita demografica, della spesa pubblica e dell’inflazione.

Suggested Citation

  • Chirwa, Themba G. & Odhiambo, Nicholas M., 2016. "What Drives Long-Run Economic Growth? Empirical Evidence from South Africa," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(4), pages 429-456.
  • Handle: RePEc:ris:ecoint:0788
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    References listed on IDEAS

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    Cited by:

    1. Saungweme & Odhiambo, 2021. "Does Public Debt Granger-Cause Inflation in Tanzania? A Multivariate Analysis," Working Papers AERI0621, African Economic Research Institute (AERI).
    2. Nyasha Sheilla & Odhiambo Nicholas M., 2019. "The Impact of Public Expenditure on Economic Growth: A Review of International Literature," Folia Oeconomica Stetinensia, Sciendo, vol. 19(2), pages 81-101, December.
    3. Chirwa, Themba G & Odhiambo, Nicholas M., 2018. "The determinants of public debt in the Euro area: A panel ARDL approach," Working Papers 23509, University of South Africa, Department of Economics.
    4. Chirwa, Themba G & Odhiambo, Nicholas M., 2018. "Electricity consumption and economic growth: New evidence from twelve countries," Working Papers 23508, University of South Africa, Department of Economics.
    5. Leshoro, Temitope L A, 2017. "An empirical analysis of disaggregated government expenditure and economic growth in South Africa," Working Papers 22644, University of South Africa, Department of Economics.

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    More about this item

    Keywords

    South Africa; Autoregressive Distributed Lag Model; Economic Growth;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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