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The impact of policy reversal on economic performance in Sub-Saharan Africa

Milton Yago () and Wyn Morgan

European Journal of Political Economy, 2008, vol. 24, issue 1, 88-106

Abstract: The literature suggests that investment and economic growth respond very slowly to economic reform due to uncertainty about the permanence of reform. Despite clear theoretical underpinnings for the idea that policy reversal significantly impedes economic performance, there is limited empirical evidence on this topic. This paper derives empirical proxies for the probabilities of different types of policy reversal and investigates their impact on investment and growth in Sub-Saharan African countries. The results show that trade, fiscal, savings and financial policy reversals have been very damaging to investment and economic growth. The paper also finds that it is the prediction or expectation that reversal will occur that hurts performance. There is no evidence that exchange rate policy reversal has damaged performance.

Date: 2008
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Citations: View citations in EconPapers (4)

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European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

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