Macroeconomic Determinants of Private Investment in Sub-Saharan Africa

Abstract

Using panel data covering the period 2000–2017 for 35 Sub Saharan African (SSA) countries, this study applied the pooled regression, fixed effects and random effects models as well as the Panel Corrected Standard Error (PCSE) technique in an attempt to analyze the macroeconomic determinants of private investment. Critical diagnostic tests were carried out: unit root tests indicated that the employed data was stationary. Further diagnostic tests also indicated that the fixed effects model is suffering from heteroskedasticity, autocorrelation and cross-sectional dependence. The PCSE technique was applied to counter the detected statistical problems. Main study findings indicated that, in the SSA region, private investment was determined by GDP, real interest rates, public investment and inflation. The research then proposed four policy recommendations for consideration by the SSA countries in order to materialize the much awaited private sector growth.

Keywords: Sub-Saharan Africa (SSA), Private Investment, PCSE, Panel Data

JEL Classification: D92, E22, R42