The purpose of this paper is to examine the causal relationship between the copper price dynamics and economic growth in Zambia over the period from 1995 to 2015.
The study uses a data set assembled from five difference sources: the heritage foundation; the London metal exchange index; the Penn World Tables version 9.0; the total economy database; and the World Bank Development Indicators. The paper employs the Bayesian Model Averaging (BMA) approach as the estimation technique.
The estimates demonstrate that there exists a positive and significant relationship between movements in copper prices and economic growth in Zambia. The study draws policy implications from these findings.
This study is limited to the period from 1995 to 2015, this is due to lack of data on the country’s institutional indicators, trade openness and the real exchange rate.
There have been calls to diversify the economy of Zambia due to the recurring chaotic events, which are often induced by over-dependence on copper exports. Thus, the study findings will be useful to academia, policy makers and stakeholders with vested interest in the economy of Zambia.
To the best of the author’s knowledge, this is the first empirical study to investigate the causal relationship that exists between copper prices and economic growth in Zambia. The existing empirical studies in the domain have devoted their attention on establishing the relationship between commodity price movements and exchange rates in Zambia.
This paper was previously circulated under the title “Does a slump in copper price presage inflation and low growth in Zambia? Evidence from a vector error correction model.” The author would like to thank Themba Chirwa, Allan Davids, Mamudu Abunga Akudugu, Noah Nzeribe, five anonymous referees, the Editor (Professor John Kuada), and seminar participants at Bournemouth University and University of Cape Town for pertinent and helpful suggestions. Any views expressed in this paper do not necessarily reflect the views of the University of Cape Town and Bournemouth University. All remaining errors are of the author’s own.
Chikalipah, S. (2019), "Does a meaningful relationship exist between copper prices and economic growth in Zambia?", African Journal of Economic and Management Studies, Vol. 10 No. 1, pp. 72-84. https://doi.org/10.1108/AJEMS-04-2018-0095Download as .RIS
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