Openness, Government Expenditure and Economic Growth in Sub-Saharan Africa

Abstract

This study investigated the dynamic relationship among government spending, trade openness and economic growth in some selected sub-Saharan African countries; covering a period of 1980 to 2015 with an annual data. The specific objective examined the trend of government spending, trade openness and economic growth in some selected Sub-Saharan African countries. In particular, an attempt was made to test the existence of co-integration and nature of shock transmission processes. It employed descriptive and VAR methodology for the estimation of the model with impulse response function and variance deposition. The result revealed that: economic growth and government spending in Sub-Saharan Africa shows a similar relationship as the economic growth rises and falls, the government expenditure also follow the same pattern, trade openness, government spending and economic growth shows a long-run co-integration relationship. The findings of this research indicate that government expenditure has a significant negative relationship with economic growth in the sub-Saharan countries, the reason being that Governments of the Sub-Saharan countries focused resources on unproductive activities and expenditures on a deadweight project which lead to negative impact on economic growth. We, therefore, recommend that Africa countries should spend their resources on projects that have a direct bearing on growth parameters in order to have a positive impact on economic growth.