Institutions, Macroeconomic Policies and Economic Growth in Africa: Evidence from Panel Data

Abstract

This study investigates the effects of institution and macroeconomic policy on economic growth in Africa, using panel Cointegration technique to analysed data obtained from a panel of 50 African Countries covering a period of 25years (1990-2014). The results confirm that declining growth rate in Africa is due to poor management of macroeconomic policies. A weak turning point is also confirmed to exist for government size in the short run; in the long run it becomes more pronounce. The Wald restrictions tests of causality ascertain that institutions lead economic growth performance in the short run, while poor economic growth performance impaired the capacity required in building strong institutions which in turn stunts growth in the long run. Therefore, African leaders should tilt their expenditure in favour of human capital development and strong institution, ensure intra-regional trade and adopt private sector led – economic growth strategy.