The interplay of governance and economic performance in Africa : evidence from Granger causality tests

Bouhlel, Sofian (2024) The interplay of governance and economic performance in Africa : evidence from Granger causality tests. GRADUS, 11 (3). ISSN 2064-8014

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Abstract

This study examines the causal relationships between governance indicators and economic performance across three African regions, Eastern and Southern Africa, Western and Central Africa, and North Africa, using Granger causality tests. The analysis highlights the significant roles of political stability, institutional quality, and economic activities in shaping regional development. In Eastern and Southern Africa, political stability is found to significantly influence both trade and foreign direct investment (FDI), while FDI also impacts the control of corruption. In Western and Central Africa, trade enhances voice and accountability, and political stability, along with government effectiveness, rule of law, and control of corruption, drives FDI. In North Africa, voice and accountability play a crucial role in influencing trade. These findings underscore the importance of stable political environments and strong institutions in fostering economic growth and attracting foreign investment in Africa. The study provides valuable insights for policymakers aiming to promote sustainable development through improved governance and economic strategies.

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