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How important are external shocks in explaining growth in Sub-Saharan Africa? Evidence from a Bayesian VAR

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  • SENBETA, Sisay Regassa

Abstract

This paper assesses the relative importance of external shocks in explaining the GDP growth in Sub-Saharan African countries. We estimate a Bayesian VAR model with the Stochastic Search Variable Selection (SSVS) approach for five countries in the region - Botswana, Ethiopia, Kenya, Mauritius, and Nigeria - two of which are among the fastest growing countries over the last decade, while the other three are countries for which relatively complete data are found on variables of interest. The results suggest the following two points. First, the contribution of external shocks to the variation in the growth rate of GDP of the home country varies significantly across the countries considered. Second, the terms of trade shock is the most important of the external factors we included in our analysis. One lesson that can be drawn from this study is that generalizations about the impact of external shocks to the whole Sub-Saharan African region are misleading.

Suggested Citation

  • SENBETA, Sisay Regassa, 2012. "How important are external shocks in explaining growth in Sub-Saharan Africa? Evidence from a Bayesian VAR," Working Papers 2012010, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2012010
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    More about this item

    Keywords

    Bayesian VAR; Economic fluctuations; External shocks; Low-income countries; Sub-Saharan Africa;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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