Economic Governance and Productivity Nexus: The Roles of Institutional Quality, Fiscal Policy, and Monetary Policy in Achieving Economic Transformation in Africa

The pursuit to attain peace, justice, and robust institutions, as outlined in Sustainable Development Goal (SDG) 16, as well as the need to focus on building resilient infrastructure, promoting inclusive and sustainable industrialisation, and fostering innovation as outlined in SDG 9 continues to be a priority in Africa. The continent stands at a pivotal juncture in its economic evolution, where the roles of governance and institutional frameworks intersect to shape the region’s productive economy. As the region grapples with a diverse array of economic challenges and opportunities, understanding the dynamics of institutional quality, fiscal policies, and monetary policies is crucial to fostering economic productivity in the region. As a result, this research delves into the intricate web of factors influencing the region’s economic landscape, aiming to unravel the role of institutional quality and fiscal and monetary policies in fostering the regional production economy. The findings from the study demonstrated that institutional quality has adverse effects on economic productivity in Africa. On the other hand, monetary policy had positive effects on economic productivity, while fiscal policy had negative effects on economic productivity in Africa. The threshold findings using the interactive effects showed that for fiscal policy to improve real GDP growth in Africa, government expenditure (% of GDP) should be at least 6.17%. In contrast, inflation must not go beyond 15.15% for monetary policy to promote sustainable economic growth. These findings prove that strong governance and institutions are linked to better productivity and performance. In other words, if monetary and fiscal policy align their objectives and focus on fostering strong governance and building quality institutions, economic productivity can be improved in Africa. The findings of the study provide a timely and holistic review of the subject, offering a roadmap for policymakers and stakeholders striving to navigate the region’s complex economic landscape.