An empirical test of exogenous growth models: Evidence from three southern African countries

Abstract

This paper aims to empirically investigate the relevance of exogenous growth models in explaining economic growth in three Southern African countries, using the recently developed ARDL bounds-testing approach. Furthermore, the relevance of the convergence hypothesis in these study countries is tested using an extended exogenous growth model. The study results reveal that the predictions of the Solow and augmented Solow growth models are consistent in the three study countries, and that the convergence hypothesis holds. However, when additional factors are taken into account in exogenous growth models, the response of income per capita due to changes in investment and human capital development is slow in economies with low income per capita, such as Malawi and Zambia, compared to South Africa, which is ranked as an economy with a high income per capita. This study has important policy implications in these study countries. These implications include the need for policy makers to ensure that macroeconomic stability is encouraged by reducing government consumption, inflation, and population growth; and by promoting trade in order to allow for the diffusion of technologies from abroad.