The Determinants of GDP Growth Rate in East Africa

Abstract

Understanding the determinants of economic growth in East Africa is a crucial challenge since a significant share of the world’s poor lives in Africa, while sustained economic growth can move millions out of poverty, is a great important. In this sense, we study how the financial sector development (FSD), the involvement of human capital resources (HCR), and the inward flow of foreign direct investment (FDI) can affect economic growth. Using panel econometric methods, we investigate and obtain the results highlight the importance of the main determinants in the East Africa economic growth from the year 1975-2019. Thus the long-run estimation empirical results obtained by the multivariate autoregressive distributed lags, ARDL (2,1,1,1) method, reveal that both FSD and FDI have positively significant effects on economic growth in the panel countries. In addition, the bivariate wavelet analysis of panel ARDL (1,1) estimation, indicates both FDI and GDP growth rates have significantly positive contribution to each other and dynamic inter-temporal causal effects on one another in the short, medium, and long-terms.