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Economic Change and Restructuring

Erschienen in:

03.01.2023

Economic policy uncertainty, governance institutions and economic performance in Africa: are there regional differences?

verfasst von: Davidmac O. Ekeocha, Jonathan E. Ogbuabor, Oliver E. Ogbonna, Anthony Orji

Erschienen in: Economic Change and Restructuring | Ausgabe 3/2023

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Abstract

In recent years, the global economy has witnessed several uncertainty-inducing events. However, empirical evidence in Africa on the effects of economic policy uncertainty (EPU) on economic activities remains scanty. Besides, the moderating effect of governance institutions on the uncertainty-economic performance relationship in Africa and the likelihood of regional differences in the response of economic activities to EPU on the continent are yet to be investigated. To address these gaps, we applied system GMM and quantile regressions on a panel of forty-seven African countries from 2010 to 2019. We find that while global EPU and EPUs from China, USA and Canada exert considerable influence on economic performance in Africa, the effects of domestic EPU and EPUs from Europe, UK, Japan, and Russia were negligible, suggesting that African economies are resilient to these sources of uncertainty shocks. We also find that governance institutions in Africa are not significantly moderating the uncertainty-economic performance relationship. However, our results highlighted regional differences in the response of economic activities to uncertainty, such that when compared to East and West Africa, economic performance in Central, North and Southern Africa is generally more resilient to global EPU and EPUs from China, USA, Europe and UK. We highlighted the policy implications of these findings.

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The choice of simultaneous Quantile Regression (QR) is due to its superiority over OLS, for the following reasons: (1) Socio-economic indicators may be characteristic of different patterns of distribution (De Silva, Simons and Stevens 2016), in which the zero-conditional mean assumption of OLS would be ineffective; (2) QR accounts for this deficiency and ineffectiveness (Salman et al. 2019); (3) QR makes no assumption as regards the presence of moment function (Zhu et al. 2016a, b); (4) Its estimates are still robust in the presence of outliers (Bera et al. 2016) and; (5) No distributional assumptions are considered (Sherwood and Wang 2016).

The countries included in the study are: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Comoros, Congo Republic, Cote d’Ivoire, Congo Dem. Rep., Egypt, Equatorial Guinea, Eswatini, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia, and Zimbabwe.

All the EPU data were obtained as simple arithmetic average of the corresponding 12 monthly figures, while the World Uncertainty Index (WUI) data were obtained as simple arithmetic average of the corresponding 4 quarterly figures. Domestic EPU is the EPU of the respective African Countries.

Here, the number of cross sections is 48, while the number of time periods is 10. Thus, the number of cross sections is approximately five times the number of time periods. According to Dong et al. (2018) and Sarafidis and Robertson (2009), testing for cross-sectional dependence (CD) is important, especially in dynamic panels where the number of cross-sectional units is higher than the number of time periods (\(N>T\)). Indeed, this is essential in order to avoid inefficient and misleading estimates. Hence, we conducted tests for cross-sectional dependence (CD) as part of the empirical procedures for this study using the Pesaran (2020) CD tests.

We also present the skewness and kurtosis test for normal distribution on the regressand, in the Appendix. The results reject the null hypothesis of normality, and it is consistent across African regions.

To conserve space, we do not reproduce the results of these preliminary tests here. However, they are available on request.

The quantile regression results are presented in Appendices 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34 and 35. For want of space, the quantile regression plots are not reported, but they are available on request.

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Titel: Economic policy uncertainty, governance institutions and economic performance in Africa: are there regional differences?
verfasst von: Davidmac O. Ekeocha
Jonathan E. Ogbuabor
Oliver E. Ogbonna
Anthony Orji
Publikationsdatum: 03.01.2023
Verlag: Springer US
Erschienen in: Economic Change and Restructuring / Ausgabe 3/2023
Print ISSN: 1573-9414
Elektronische ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-022-09472-7

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