The Determinants of Economic Growth in the Sudan

Abstract

The study was intended to establish the possible factors that determine economic growth in the Sudan.  Using OLS, the study uses real GDP to proxy for economic growth with the regressors comprising population, foreign direct investment, government consumption expenditure, household per capita consumption expenditure, physical capital (in terms of fixed capital formation), inflation, openness of the economy, and financial sector development. Having established the existence of cointegration in the model, the study proceeded to estimate the ECM. The results have revealed that foreign direct investment and financial sector development have been significant and carry the expected signs in both the long-run and the short-run models. While inflation has been significant and carries the expected sign in the long run model, it has been insignificant in the short run. Both the government consumption expenditure and household consumption expenditure have been significant in the long run and the short run models but with unexpected signs. Additionally, while infrastructure has been insignificant in the long run, it has been significant in the short run but carries unexpected sign. The openness of the economy has been a significant factor in boosting economic growth in the short run but not in the long run. Throughout the study, population has been an insignificant determinant for economic growth in the Sudan. Although the study managed to achieve the intended objectives, the study suffers from lack of data on some variables namely natural resources, human capital, political factors, taxes, and research and development. Additionally, the study has not separated the macroeconomic determinants of economic growth from the other determinants. Given the above shortcomings, the study recommends for further investigation to be conducted by incorporating the cited variables into the model. It would equally be necessary to conduct a study that separates the macroeconomic determinants of economic growth from the other determinants to be able to gauge the effects separately.

Keywords: Sudan, Economic growth, Unit root, Cointegration, ECM, Determinants