Applied Journal of Economics, Management and Social Sciences

Financial development and private investment on inclusive growth in Sub-Saharan African countries: A second generation PARDL approach

2024-04-15T16:20:19+01:00

The pursuit of inclusive growth necessitates a comprehensive strategy that addresses entrenched structural barriers curbing economic participation and overall well-being. At the heart of this endeavour lies the significance of a stable financial system. Such a system, by fostering financial inclusion, bolstering entrepreneurship, enabling long-term investments, and enhancing economic stability, holds the potential to bridge the disparities impeding inclusive growth. This study delves into the intricate interplay between financial development, investment, and the realization of inclusive growth. Utilizing data spanning 27 African countries from 2005 to 2021, this research employs the Augmented Group Mean (AGM). The findings illuminate the multifaceted impacts of financial development on gross domestic product per person employed, an indicator of inclusive growth. Importantly, the study underscores the pivotal role a stable financial system plays in fostering overall inclusive growth and creating a conducive environment for equitable economic participation and prosperity for all segments of society.

Interaction effect of institutional quality on the relationship between economic factors and unemployment in Sub-Saharan Africa

2024-04-02T17:41:40+01:00

The unemployment rate in Sub-Saharan Africa (SSA) has been steadily increasing over the years. This rise may be attributed to weak institutional quality. Although governments in SSA countries have adopted several policies to improve institutional quality, unemployment still remains a critical problem in SSA. Several studies on the determinants of unemployment have failed to consider the impact of institutional quality on unemployment. The study employed an ex-post facto research design to examine the determinants of unemployment and the role of institutional quality in SSA. Based on data availability, panel data between 1996 and 2021 from 24 selected countries were used for the analysis. Data were analyzed using the Dynamic Panel Autoregressive Regressive Distributed Lag. The study adopted a 5% level of statistical significance. Findings indicated the existence of long-run relationships among the variables. The study concluded that institutional quality affected unemployment in SSA. The study recommended that all countries in the region should strengthen their institutional quality by ensuring political stability and regulatory quality to reduce the rate of unemployment.

Economic Globalization, Entrepreneurship and Welfare in African Oil Exporting Countries

2024-04-01T13:16:36+01:00

The desire of policymakers in developing countries is to achieve rapid and sustainable economic growth. This is because achieving such growth will open diverse opportunities for people to be creative and productive. The need for these policies to accelerate the level of growth is not unconnected to the high unemployment rates, ravaged poverty, and rising inequality that led to low inclusive growth. To achieve the needed growth, there is a need for a resurgence in entrepreneurial activities and increased economic globalization. On this basis, the study examined the effect of economic globalization and entrepreneurship on GDP per capita in oil-exporting African countries. The research used ex-post facto research design. The study comprised 16 oil-exporting countries in Africa. The sample period is from 2006–2021. The study revealed that there is evidence that economic globalization and entrepreneurship significantly influence GDP per capita (Wald-test (6, 249) = 18.32, p < 0.05). The study concluded that economic globalization and entrepreneurship have a significant influence on GDP per capita in the selected oil-exporting countries in Africa. The study recommends that oil exporting African countries policy makers should change their centrally planned economies and hand more responsibility over to private sector players, with the government performing regulatory roles.

Measuring Sub-Saharan Africa Economic Resilience to External Shocks: The role of Adaptive Policy Space

2024-03-08T08:47:33+00:00

This study proposes a framework for assessing and improving the economic resilience of Sub-Saharan African (SSA) countries in the face of common external shocks. The study employed graph methodology, specifically the augmented Min-Max normalization approach to estimate the Economic Resilient Index (ERI). The ERI, an average of five sub-indices representing five major macroeconomic fundamentals that either help to dampen the effect of external shocks or facilitate the recovery from external shock. The study reveals that on an average, SSA economic resilience ranges between 0.48 to 0.54. The index is between 0 to 1 index scale, with the latter representing highest resilience. Furthermore, the study revealed that Southern Africa is the most resilient sub-region, with an average ERI ranging from 0.58 to 0.65, while East Africa emerges as the least resilient, albeit with significant variations among its constituent countries. Botswana consistently maintains its position as the most resilient country throughout the sample period (1998-2021), except in 2016 where it ranks second. Similarly, Southern African countries such as Mauritius, Namibia, and South Africa demonstrate robust resilience performance.

Comparing the computed average ERI with inflation and output growth rates, the study observes a consistent correlation, highlighting the relevance of the ERI in tracking macroeconomic performance. The findings underscore the importance for SSA countries to establish frameworks for monitoring economic resilience, facilitating targeted improvements and ensuring a comprehensive understanding of comparative strengths and areas in need of enhancement.

Human Capital Development and Inclusive Growth in Sub-Saharan Africa: The case for Health

2024-02-16T07:27:06+00:00

This study examined the effect of human capital development on inclusive growth in SSA with a focus on the health dimension of human capital. Panel data from 20 SSA countries between 2000 and 2021 were used for the analysis. The study employed the General Method of Moment (GMM) and the Feasible Generalized Least Square estimation method to analyze the relationship between the variables of interest. The result showed that life expectancy at birth had a negative and significant effect on the inclusive growth index while public expenditure on health had a positive and significant effect on inclusive growth index. The study concluded that human capital development health dimension has a significant impact on inclusive growth in SSA. The study recommended that policy efforts toward achieving inclusive growth should focus on substantially increasing government spending on health. Policy efforts towards achieving inclusive growth should not focus only on improving the health of the population but also ensure that such citizens have equal opportunities for empowerment and welfare support.

Moderating Effect of Institutional Quality on the Population Growth-Environmental Sustainability Nexus in Sub-Saharan Africa

2024-01-29T13:22:06+00:00

This study examines the moderating effect of institutional quality on the population growth-environmental sustainability nexus in Sub-Saharan Africa (SSA) over the period 2000 – 2020. Applying the Generalized Method of Moments (GMM) estimation technique and a Granger causality test to check if there exists any causality between population growth and emission levels, the findings indicate that population growth positively impacts on emission level in Sub-Saharan Africa, thus, affecting the environment negatively. However, its observed effect was statistically insignificant due to the interaction of institutions with population growth which proved significant. The results further indicate that other macroeconomic variables impacting positively and significantly on emission level in SSA are economic complexity index and per capita GDP. The study also establishes that there is no causal relationship between population growth and emission level in SSA. Lastly, the study finds that institutions play a vital role in reducing emission levels in the zone. It is therefore recommended that the government should vigorously pursue population and environmental policies directed at promoting environmental sustainability by controlling population, and promoting sustainable environmental practices.

Does Monetary Policy Have a Direct Impact on the Real Sector? Evidence from Nigeria’s Manufacturing and Solid Mineral Sectors.

2023-12-20T09:50:15+00:00

This paper investigates the influence of Nigerian monetary policy on both the manufacturing and solid minerals sectors. The study employed Autoregressive Distributed Lag Model (ARDL) to estimate the relationship. The uniqueness of this study lies in the use of extensive monetary policy variables (money supply, exchange rate, credit advanced to each studied sector, interest rate, and inflation rate) to provide comprehensive evidence of their impacts on the sectors under investigation and the inclusion of the investigation on solid minerals sector. It is established in this paper that the monetary policy variables jointly influence the output from both the manufacturing and solid minerals sectors within the study period. Consequently, expansionary policy with respect to money supply and credit advanced to the manufacturing sector is found to be jointly significant. While interest rate expectedly has inverse influence on manufacturing output, the exchange rate unexpectedly has positive influence on the sector. For the solid minerals sector, both the interest and exchange rates have inverse effects on the sector, in line with a priori expectation. The study's conclusion implies that policymakers should prioritize ensuring accessible credit to the manufacturing and solid minerals sectors. It emphasizes the adverse impact of interest rate hikes on sectoral growth, urging cautious management of interest rates. Stabilizing the foreign exchange market is deemed essential for creating a conducive environment for growth. Policymakers are encouraged to implement measures that facilitate credit accessibility to investors in these sectors, supporting investment and expansion initiatives.

Understanding Nigeria’s Monetary Stance: Insights from Monetary Conditions Index (MCI)

2023-12-15T15:55:54+00:00

The study provides insights and revisits the construction of the Monetary Condition Index (MCI) for Nigeria to aid in evaluating the stance of monetary policy over time. The study covers periods from 2000Q2 to 2022Q4, coinciding with key reforms in the money and foreign exchange markets, the adoption of the I&E window as the official exchange rate of the CBN, and the adoption of a new monetary policy framework in 2006. The result of the long-run coefficients was applied as a weight to the deviations of the MCI components to derive the monetary conditions indices. The result of the deviation suggests that the Narrow MCI was more stable than the Broad MCI, and both have mimicked the actual policy stance of the CBN to a large extent. Also, the study found some level of convergence between the MCIs and the monetary policy stance, suggesting that monetary conditions are in line with the Bank’s signalling instrument. In conclusion, the forecast of the MCIs suggests a tightening policy stance in the short to medium term. The study, thus, recommends that the CBN continue tightening its monetary policy rate for the next 12 quarters.

Moderating Effect of Governance on the Nexus of Tax Policy and Economic Welfare in Sub-Saharan Africa

2023-11-24T10:23:47+00:00

Sub-Saharan Africa (SSA) has demonstrated slow progress in enhancing sustainable economic welfare, evidenced by growing economic inequalities and disparities. This raises concerns regarding the efficacy of existing economic strategies and governance frameworks. Furthermore, there is a paucity of literature on the role of governance in understanding the nexus between tax policy and economic welfare. The study utilized data available from 1996 to 2022 for 36 SSA countries obtained from World Development Indicators (2022) and World Governance Indicators (2022). The data were analyzed using the System-Generalized Method of Moments (GMM). The study concluded that for the well-being of individuals and communities to be enhanced in SSA, tax policy must be optimized in a way that maximizes benefits or minimizes liabilities within the legal framework. Therefore, we recommend that by addressing governance challenges and promoting good governance practices, policymakers can create an enabling environment for the effective design and implementation of tax policies that contribute to sustainable economic development and welfare.

Funding Options for Budget Deficit in a Resource Rich Country

2023-10-10T15:13:17+01:00

This study investigates various funding options for Nigeria’s annual budget deficit, utilizing quarterly data spanning the period from 2011q1 to 2021q4. To achieve the study's objective, the Vector Error Correction model was employed, establishing the existence of a long-run relationship among the series. Findings indicate that tax revenue exhibits a higher rate of re-adjustment to equilibrium in the short run compared to other funding options, suggesting its greater effectiveness. This is followed by external borrowing and domestic borrowing. However, the Granger causality test reveals that tax revenue does not Granger-cause economic growth in Nigeria, implying inefficiency in Nigeria's tax revenue. This situation might necessitate broadening the tax base in the economy and improving overall government fiscal operations to narrow the persisting deficit in the budget.