Five essays on Sub-Saharan Africa economic development: External debt, poverty, natural resources, corruption, and trade

Sub-Saharan Africa (SSA) region is undergoing an unparalleled economic depression, which is having a significant negative effect on development. Fewer commodity prices, poor governance performance, and higher import dependence, compounded by much-needed home lockdowns and other pandemic-control measures, have resulted in a serious and widespread worsening of the economic condition. The hazards of financial distress have grown due to limited budgetary flexibility, difficult financing circumstances, and growing foreign debt. Among the various challenges that face the development of the Sub-Saharan African region, this dissertation in form of five independent essays attempts to inspect five major issues that tackle the sustainable path of economic development in the Sub-Saharan African countries namely; external debt, poverty, resource curse, corruption, and trade. Chapter Two investigates the impact of external debt on economic growth as well as the differential impact of debt below and above a threshold that is empirically estimated using the Panel Threshold regression method. For a robust estimation, the Generalized Method of Moments (GMM) has also been employed to investigate the dynamic link between external debt and economic growth. The findings found no evidence of a non-linear relationship between debt and economic growth. It has been indicated that the deleterious impact of external debt on economic growth does not preclude poor or rich SSA countries. Results from dynamic panel threshold estimates reveal that external debt has a negative and significant effect on economic growth above the threshold level of 43.25%. The adoption of robust ways to generate domestic revenue to complement external sources of funding such as the inclusion of all domestic informal businesses onto a common state-of-the-art platform so that domestic revenue collection will be effective. Chapter Three inspects if variations in poverty between nations or regions are attributable to variations in income inequality or changes in mean income levels by the Panel Vector Autoregressive (PVAR) Model. Forecast error variance decomposition (FEVD) and impulse response functions (IRF) are employed in this investigation to estimate the effect of positive economic growth and income inequality shocks on poverty intensity in the short and long term. Findings of PVAR reveal that all three main variables have a significant causal relationship. The analysis shows that economic growth may potentially accelerate poverty reduction by 2.28 percent. Moreover, the results also prove a two-way positive nexus between the poverty gap and income inequality, suggesting the rise in the income inequality index results in a 3.53 percent increase in poverty intensity. These findings imply that Sub-Saharan African governments should focus on policies that narrow the economic disparities which result in considerably reducing poverty. The experiences of several emerging countries demonstrate that structural transformation toward income inequality reduction has a greater influence on poverty than the average rise in per capita GDP. Chapter Four examines the commonly held belief that natural resources are harmful to economic growth in resource-rich countries employing the Panel Quantile Regression method. As reported by Sachs and Warner (1997), natural resource-rich African economies have a larger service sector and a smaller industrial sector than resource-poor African nations. Furthermore, raw-material-rich nations tend to have slower GDP per capita growth in manufacturing exports. Findings support the resource curse hypothesis in Sub-Saharan African countries specifically the resource-rich countries. African governments should be ensured that natural resource rents are directed from traditional sectors to modern sectors. In this way, instead of using resource rents inefficiently in non-productive areas, productive sectors are offered the opportunity to grow and develop. Consequently, it is vital that the country optimized productive investments. Chapter Five assesses the determinants of corruption in Sub Sahara Africa and focuses on the effect of institutional quality on corruption by applying the Instrumental variables Two Stages Least Square (IV-2SLS) regression model. The model is based on Luo's (2005) approach, which includes institutional theories as a theoretical approach established by DiMaggio and Powell (1983), Tolbert (1996), and Scott (2001). Results highlight the significant effects of four institutional quality indicators (government effectiveness, political stability, voice and accountability, and rule of law) on the reduction of corruption. Also, general results show that income inequality measured by the GINI index plays an important role in increasing corruption levels. Therefore, SSA governments should take responsibility for implementing a comprehensive whistle-blower protection act to guarantee that those who speak out about dishonest or illegal activities occurring in a government organization are not retaliated against. Also, should endeavor to raise community awareness about the risks of corruption and the necessity of anti-corruption legislation to foster resilience and integrity at all levels of society. In Chapter Six, the causal relationship between trade flow and economic growth has been examined using the Cross Sectionally Auto-Regressive Distributed Lag (CD-ARDL) and the latest Granger non-causality method developed by Juodis et al. (2021). The outcomes reveal that for upper middle-income countries group, expanding exports through various export promotion techniques has been an essential component of their economic growth path. As a result, the study suggests that both export promotion methods and pro-growth policies be strengthened, because economic growth and exports have been shown to support each other in those nations. However, there is robust evidence of unidirectional causality running from economic growth to imports in low-income and lower-middle-income countries. Broad comparisons suggest that growth is connected to imports. The study cautions low-income and lower-middle-income SSA nations against depending too heavily on an export-led growth strategy to attain a sustainable growth path, where there is no prevailing causal association between exports and economic growth has been observed in such countries. Keywords: Economic growth, income inequality, institutional quality, panel data analysis, sustainable development, indebtedness.