What drives long-run economic growth? Empirical evidence from South Africa
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Authors
Chirwa, Themba G
Issue Date
2016
Type
Working Paper
Language
en
Keywords
Republic of South Africa; Autoregressive Distributed Lag Models; Economic Growth
Alternative Title
Abstract
In this study, we examine empirically the key determinants of economic growth in South Africa –
using the ARDL bounds-testing approach. The paper has been motivated by the low and dwindling
economic growth that South Africa has been experiencing in recent years. Our study finds that the
key macroeconomic determinants that are significantly associated with economic growth in South
Africa include, amongst others, investment, human capital development, population growth,
government consumption, inflation, and international trade. The study finds that in the short run,
investment is positively associated with economic growth, while population growth and government
consumption are negatively associated with economic growth. However, in the long run, the study
finds investment, human capital development and international trade to be positively associated
with economic growth, while population growth, government consumption, and inflation are
negatively associated with economic growth. These results have important policy implications.
They imply that economic strategies pursued in the short run should include policies that attract
investment, and reduce population growth and government consumption. However, long-run
strategies to be adopted should include those that attract long-term investments, improve the
quality of education, as well as trade liberalization; and ensure a reduction in population growth,
government consumption and inflation.
Description
Working Paper 02/2016