Revisiting democracy-growth nexus in Sub-Saharan Africa with macroeconomic variables modelling

Abstract

Purpose

A popular convention in the political-economy literature is that causality runs from democracy to economic growth. That thinking has continued to evoke significant debates among scholars. This study aims to propose a new research experiment by investigating whether macroeconomic variables cause democratisation.

Design/methodology/approach

The study uses a panel data set of 48 carefully selected economies in Sub-Saharan Africa spanning 1991 to 2020 and uses the PVAR system generalised method of moment (GMM) approach.

Findings

With the application of three macroeconomic indicators: economic growth, full employment and balance of payment equilibrium, the study suggests that economic growth has a negative implication on the democratisation process and that the incentives that increase national income provide in the global South enable autocratic rulers to impede democratic growth. The Granger causality test demonstrates a unidirectional effect from economic growth to democracy. The eigenvalue stability condition, impulse response function and forecast-error variance decomposition all confirmed the validity of the findings with the PVAR system GMM. Finally, the study proposed policy and theoretical implications for the political stakeholders.

Social implications

Robust development of economic institutions (particularly the anti-corruption and rule of law) in the global South is required to tame the potential for the state actors to turn public resources into personal use to further their parochial political interest in the form of perpetuating themselves in office which negates the ideals of democracy and social norms. Strong institutions could prevent the misuse of national income and enhance a good quality of life for the citizenry, making them grow confidence in the democratisation process.

Originality/value

The research paper makes an insightful contributions from the methodological perspective and the sampling perspective. The author uses a new research method, the PVAR system GMM becoming the first attempt of such a method to be applied in determining the causal effects of macroeconomic variables on democracy in the literature. Another relevant contribution of the study relates to the sample technique of selecting economies from the Sub-Saharan Africa with notable weak or slow democratisation process.

Citation

Ajayi, T.A. (2024), "Revisiting democracy-growth nexus in Sub-Saharan Africa with macroeconomic variables modelling", Transforming Government: People, Process and Policy, Vol. 18 No. 4, pp. 744-767. https://doi.org/10.1108/TG-05-2024-0124