The macroeconomic drivers of economic growth in SADC countries

Abstract

This study empirically investigates the key macroeconomic determinants of economic growth in three Southern African Development Community countries, namely: Malawi, Zambia, and South Africa, using annual data for the period 1970-2013. The study uses the recently developed Autoregressive Distributed Lag bounds-testing approach to co-integration and error correction model. In Malawi, the study finds that investment, human capital development, and international trade are positively associated, while inflation is negatively associated with economic growth in the short run. In the long run, the results reveal that investment, human capital development, and international trade are positively and significantly associated, while population growth and inflation are negatively and significantly associated with economic growth. In Zambia, the short-run results reveal that investment and human capital development are positively and significantly associated, while government consumption, international trade, and foreign aid are negatively and significantly associated with economic growth. The long-run results reveal that investment and human capital development are positively and significantly associated, while foreign aid is negatively and significantly associated with economic growth. In South Africa, the study results show that in the short run, investment is positively and significantly associated, while population growth and government consumption are negatively and significantly associated with economic growth. In the long run, the results reveal that economic growth is positively and significantly associated with investment, human capital development, and international trade, but negatively and significantly associated with population growth, government consumption, and inflation. These results all have significant policy implications. It is recommended that Malawian authorities should focus on strategies that attract investment: in addition there is a need to improve the quality of education, encourage export diversification, reduce population growth, and ensure inflation stability. Similarly Zambian authorities should focus on creation of incentives that attract investment, provision of quality education: moreover they need to improve government effectiveness, encourage international trade and ensure the effectiveness of development aid. South African authorities are recommended to focus on policies that attract investments, the provision of quality education, and trade liberalisation: concomitantly there is also a need to reduce population growth, government consumption and inflation.