The Econometric Analysis of the Dynamics of Economic Growth, Debts and Budget Deficits of Sub-Saharan Africa

Abstract Others have done a lot of research on analyzing the relationship between debt and economic growth. However, quantitative analysis of sub-Saharan Africa (SSA) economic growth, debt, and the dynamics of the fiscal deficit has received little attention. The main purpose of this paper is to reconsider the relationship between debt and SSA growth by testing Granger causal relationships for debt, economic growth and budget deficit. In addition, we test the existence of cointegration using vector error correction model (VECM) and extended vector autoregressive (VAR).

Milton Iyoha (1999) uses a macroeconomic weighing model to promote the effect of simulated external debt on sub-Saharan Africa's economic growth. Using a simultaneous equation model of the demand of production and investment, he concluded that there is considerable debt delinquency and congestion impact in sub-Saharan Africa. In other words, large amounts of external debt and large debt repayment are obstructing SSA's investment. He furthermore simulated the impact of the debt relief program on economic growth. In simulating various levels of debt reduction, he says that virtual virtual debt reductions will increase investment and rarely increase GDP in subsequent periods. According to the simulation, between 1987 and 1994, domestic investment per capita has decreased by 50%, gross domestic investment has increased by more than 40%, and GDP growth rate increases by 3% or more on average.

According to a two-year pulse analysis of the economic situation in Africa by the World Bank, investment growth in sub-Saharan Africa has declined to around 0.6% in 2015 from nearly 8% in 2014. This sluggish investment coincides with a sharp decline in corruption in Africa, which is another serious problem, lack of integrity of the African government. It is difficult for investors to prepare for new ideas and investments in emerging companies. Likewise, we have a very hostile business environment, the largest buyer, the government is in serious corruption, and only such people can win government contracts.