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The Macroeconomic Determinants of Economic Growth in Zambia: Do Copper prices matter?

Chizonde, Bright (2016): The Macroeconomic Determinants of Economic Growth in Zambia: Do Copper prices matter?

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Abstract

This research investigates the determinants of economic growth in Zambia using the Bounds Approach to Cointegration developed by Persaran (1999). Since Zambia’s economy is said to be dependent on copper mining, economic analysts postulate that economic growth in Zambia is dependent on international copper prices and thus externally determined. This is somewhat problematic because it absorbs policy makers and government of the responsibility to generate sustainable growth. In order to test the validity of this postulation, the study estimates an Autoregressive Distributed Lags (ARDL) Model with copper prices as one of the variables of interest. Estimation results indicate that, in the long-run, economic growth is determined by physical capital, exchange rate, inflation, crude oil price, government spending and agricultural productivity; international copper prices only influence growth in the short-run. Therefore, with proper planning and strategic policy interventions, Zambia can still achieve higher sustainable economic growth even when international copper prices are falling.

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