The Main Determinants of Economic Growth in East Africa: A Panel Approach
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Date
2019-03
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Addis Ababa University
Abstract
This study investigates the determinants of economic growth in East Africa using various types of econometric panel data models and panel wavelet time scaling analysis over the period 1975 ⎼2016.
We extend the multivariate panel methods such as autoregressive distributed lags (ARDL) to the bivariate panel wavelet time scaling analyses in order to show the short–run, medium–and long–run effects. Thus the empirical results of multivariate long–run estimations by fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) as well as by random effects(RE) and ARDL(2,1,1,1) methods reveal that both financial sector development(FSD) and foreign direct investment(FDI) have positively significant effects on economic growth in the panel countries. While the vector autoregressive (VAR) model in the transmission channel indicates that
human capital resources (HCR) is an important contribution to the development of physical capital stock (PCS) through gross national income (GNI) and vice versa, in the short–term.
The bivariate estimations made by wavelet analysis using panel FMOLS shows that as FSD increases there is a decline in the real GDP growth in the medium–term but an increase in the long–term. In the meantime, the bivariate ARDL(1,1) analysis indicates both FDI and GDP growth rate has significantly positive contribution to each other and dynamic inter–temporal causal effects to one another in the short, medium and long–terms. Finally, the obtained results of accumulated responses of GNI to HCR shows that there is a positive significant in the medium–and long–terms but that of HCR to GNI significantly negative in the short–and medium– terms and positively significant in the long–term.
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Economic Growth, FSD, HCR, FDI, Panel Data and Time Scaling Wavelet Analysis