Economic Growth in a Cross-Cultural Environment: Lessons for Selected African Countries

Abstract

In this paper, we examined the effect of globalization on economic growth of 25 selected African countries for the period 1991 to 2017. The index of globalization utilized was the Konjunkturforschungsstelle (KOF) Index of Globalization that takes into consideration the economic, social, and political dimensions of globalization. The study also examined the effect of globalization on unemployment in Africa. The study employed the panel unit root test, cointegration test, ARDL vector error correction mechanism (VECM), and Granger Causality test techniques. The panel unit root test reported a mixed order of integration necessitating the use of the cointegration test. The Pedroni cointegration test and the Fisher-ADF test revealed the presence of a long run relationship between globalization and economic growth in Africa. Based on the VECM, it was observed that globalization exerts a positive and significant effect on economic growth in the long run but a negative and insignificant effect in the short run. Also, globalization exerted a positive and significant effect on unemployment in the long run while in the short run, the effect was negative and significant. The Dumitrescu Hurlin Panel Causality Tests revealed the existence of a bi-directional relationship between globalization and economic growth in Africa. The policy implication of the paper is that African countries should realize the long run importance of globalization as a powerful force that drives a modern economy hence, coherent policies should be developed and geared towards managing the excesses of globalization so as to be moving along with the ever evolving world.

Keywords: Economic Globalization, Political Globalization, Foreign Direct Investment, Financial Liberalization, Panel Regression, Social Globalization

DOI: 10.7176/JEP/11-24-05

Publication date: December 31^st 2020