Export Commodity Prices and Long-Run Growth of African Economies

Abstract

Abstract. Government revenue in most African countries is based on export proceeds from few primary commodities. This limits their ability to manoeuvre in case of negative exogenous price shocks, with undesired effects on economic growth. This study, therefore, investigates the effect of primary commodity prices on long-run growth of 24 primary commodity-based African economies between 1980 and 2015. A neoclassical growth model, complimented with Keynesian national income identity, was estimated with Pooled Mean Group heterogeneous panel data regression. The result reveals a significant positive inelastic effect of primary commodity export prices on economic growth in the long run, especially among the less diversified African countries. Thus, Africa has less to gain from export prices increase in the long run. Hence, there is a need for African countries to intensify efforts at diversifying production and export base to minimise the impact of negative price shocks on their long run growth.