Macroeconomic Indicators and Economic Performance in Selected Sub Sahara African Countries: Panel Generalized Method of Moment Approach

Abstract

This study empirically examined the effect of macroeconomic indicators on economic performance of selected sub Sahara African Countries between 1990 and 2017. The study employed four variables: GDP growth rate, Inflation rate, Monetary policy rate and Exchange rate and panel unit root test using two criteria to test for stationarity, panel cointegration test was also conducted to test for long run cointegration between the variables employed and Generalized Method of Moment method of estimation was employed to check the relationships between the variables. The results of the panel unit root test result from the LLC and IPS methods shows that the order of integrations mixed with some of the variables being stationary at levels (GDPgr and INFL) and first difference (MPR and EXHR) at the same time. The result of Pedroni cointegration test indicated the bivariate long-run cointegration equation between the variables employed. The GMM result revealed that all explanatory variables accounted for 23% variation of Economic performance in SSA. However, the study made the following policy implications: More balanced but flexible approach towards the MPR should be embraced to allow more room for impressive economic growth in these countries. Macroeconomic policy decision is not enough to stimulate growth in the economy of any nation. The interplay of fiscal instruments and monetary instruments backed with political will of the government on genuine implementation of well-thought out programmes can be employed as the antidote to ensure that the macroeconomic objectives are achieved both in the short and long-run.