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The nexus between key macroeconomic determinants and economic growth in Zambia: A dynamic multivariate granger-causality linkage

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  • Chirwa, Themba G.
  • Odhiambo, Nicholas M.

Abstract

This study investigates the nexus between key macroeconomic determinants and economic growth in Zambia by employing the Autoregressive Distributed Lag model to test for Granger-causality covering the period 1970?2015. The empirical results reveal that there are three distinct Granger-causality hypotheses that exist in Zambia related to economic growth. The dominant hypothesis is the feedback hypothesis between investment, population growth, foreign aid and economic growth in both the short and long run; between real exchange rate, trade openness and economic growth in the short run; and between government consumption, inflation and economic growth in the long run. The second is the supply-leading hypothesis that runs from government consumption and inflation to economic growth in the short run; and from real exchange rate and trade openness to economic growth in the long run. Lastly, the neutrality hypothesis holds between human capital and economic growth in the short run. These results have significant policy implications for the Zambian economy. They imply that the authorities should focus on promoting economic incentives that encourage the growth of real GDP per capita and investment, improve the quality of human capital, trade reforms, population control, macroeconomic stability, and the effectiveness of foreign aid

Suggested Citation

  • Chirwa, Themba G. & Odhiambo, Nicholas M., 2017. "The nexus between key macroeconomic determinants and economic growth in Zambia: A dynamic multivariate granger-causality linkage," Working Papers 23476, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:23476
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    Cited by:

    1. Mariana Hatmanu & Cristina Cautisanu & Mihaela Ifrim, 2020. "The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks," Sustainability, MDPI, vol. 12(7), pages 1-23, April.
    2. Temel Gurdal & Mucahit Aydin & Veysel Inal, 2021. "The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches," Economic Change and Restructuring, Springer, vol. 54(2), pages 305-337, May.
    3. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    4. Silvia London & Gastón Cayssials & Fernando Antonio Ignacio González, 2022. "Population growth and economic growth: a panel causality analysis," Asociación Argentina de Economía Política: Working Papers 4574, Asociación Argentina de Economía Política.
    5. Larissa Batrancea & Malar Mozhi Rathnaswamy & Ioan Batrancea, 2021. "A Panel Data Analysis of Economic Growth Determinants in 34 African Countries," JRFM, MDPI, vol. 14(6), pages 1-15, June.
    6. Ruan, Fangli & Yan, Liang & Wang, Dan, 2021. "Policy effects on the sustainable development of resource-based cities in China: A case study of Yichun City," Resources Policy, Elsevier, vol. 72(C).
    7. Chirwa, Themba G. & Odhiambo, Nicholas M., 2020. "Determinants of gold price movements: An empirical investigation in the presence of multiple structural breaks," Resources Policy, Elsevier, vol. 69(C).
    8. Chirwa, Themba, 2022. "The Growth-Poverty-Inequality Nexus in Malawi: A recomputation," MPRA Paper 114486, University Library of Munich, Germany.

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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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