Testing Finance-Led, Export-Led and Import-Led Growth Hypotheses on Four Sub-Saharan African Economies

Evans, Olaniyi (2013): Testing Finance-Led, Export-Led and Import-Led Growth Hypotheses on Four Sub-Saharan African Economies.

Abstract

This study carries out an empirical examination of the finance-led, export-led and import-led growth hypothesis for four of the largest Sub-Saharan African economies namely South Africa, Nigeria, Ghana and Kenya. Within a multivariate Vector-Auto Regressive (VAR) framework, the concept of Granger causality is employed to determine the direction of causation between exports and output, duly taking into account the stationarity properties of the time series data. With further substantiation from impulse response function and variance decomposition, the empirical evidence shows (i) finance-led, export-led and import-led growth in South Africa and Kenya, (ii) finance-led and imports-led growth in Nigeria, and (iii) only finance-led growth in Ghana. These four Sub-Saharan African nations, with the help of reforms, have experienced expanding exports, increased financial development and accelerated GDP growth rates. Yet, these have yielded varying degrees of success. The agenda for economic growth is a long one in Sub-Saharan Africa. Reforms would require preconditions in the wider economic and political environment, without which they will be ineffective or even counterproductive.

• Item Type: MPRA Paper
• Language: English
• Keywords: exports, Sub-Saharan African, Granger causality, multivariate Vector-Auto Regressive (VAR), impulse response function, variance decomposition, finance-led, export-led and import-led growth hypothesis
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission; F - International Economics > F6 - Economic Impacts of Globalization > F63 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy

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