Why has growth slowed in Sub-Saharan Africa? a System IV-GMM approach.

Abstract

The paper estimated the traditional cross-country growth model and corrected for model endogeneity bias and country-specific heterogeneity effects. Using the System-IV Generalized Method of Moments (GMM) approach, it identified the key factors that determine GDP per capita growth rate in a panel regression model of I 00 countries. Parameter robustness test was applied to the models which also included: Within Fixed Effects; Pooled-Ordinary Least Square and Levels-IV GMM models, using the Extreme Bounds Analysis (EBA). It found that most of the estimated covariates that show significant coefficients in the regression model are actually fragile, except for initial income, institutions and real exchange rate overvaluation. More importantly too, the results suggested that natural resource endowment, such as oil, may not have accounted for why some resource rich developing countries (e.g. Nigeria) have grown slowly as is commonly argued in the literature.