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What drives long-run economic growth? Empirical evidence from South Africa

Themba Chirwa () and Nicholas Odhiambo ()

No 19975, Working Papers from University of South Africa, Department of Economics

Abstract: In this study, we examine empirically the key determinants of economic growth in South Africa ?using the ARDL bounds-testing approach. The paper has been motivated by the low and dwindlingeconomic growth that South Africa has been experiencing in recent years. Our study finds that thekey macroeconomic determinants that are significantly associated with economic growth in SouthAfrica include, amongst others, investment, human capital development, population growth,government consumption, inflation, and international trade. The study finds that in the short run,investment is positively associated with economic growth, while population growth and governmentconsumption are negatively associated with economic growth. However, in the long run, the studyfinds investment, human capital development and international trade to be positively associatedwith economic growth, while population growth, government consumption, and inflation arenegatively associated with economic growth. These results have important policy implications.They imply that economic strategies pursued in the short run should include policies that attractinvestment, and reduce population growth and government consumption. However, long-runstrategies to be adopted should include those that attract long-term investments, improve thequality of education, as well as trade liberalization; and ensure a reduction in population growth,government consumption and inflation.

Keywords: Republic of South Africa; Autoregressive Distributed Lag Models; Economic Growth (search for similar items in EconPapers)
Date: 2016
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