Determinants of Growth Spells: Is Africa Different?

IMF Working Papers, September 1, 2012

Source details

Research question: Do growth spells in Africa end because of bad realizations of the same factors that influence growth spells in the rest of the world, or because of different factors altogether?
Methodology:
- Bayesian Model Averaging techniques for proportional hazards models.
- Definition used: growth spells are periods of sustained growth episodes between growth accelerations and decelerations.
- Determinants examined include exogenous shocks, physical and human capital, macroeconomic policy, and sociopolitical factors.

Overall conclusion:
- Determinants of growth spells in Africa are different from those in the rest of the world.
Determinants identified as robust and distinct to the world sample:
- initial income
- terms of trade
- exchange rate undervaluation
- inflation
Determinants identified as robust and distinct to the Africa sample:
- openness
- droughts
Determinants common to both samples but with very different marginal effects:
- proxies for human capital
- proxies for physical capital
- changes in the world interest rate

Policies addressing inflation, exchange rate valuation, and terms of trade may be particularly relevant outside Africa (world sample).
Policies addressing openness and vulnerability to droughts may be particularly relevant for African growth-spell duration.
Investments in human and physical capital, and monitoring global interest rate movements, matter in both samples but require different calibrations given differing marginal effects.

Summary derived from the IMF Working Paper "Determinants of Growth Spells: Is Africa Different?"