The pooled mean group approach on saving and investment link in Africa: Implication on capital mobility

This paper examines the link between saving and investment in Africa. Pooled Mean Group (PMG) is used in investigating the link. The global data sample covers thirty (30) African countries and a period of thirty-five (35) years. The analysis result reveals that there is a positive link between saving and investment, and the saving-retention coefficient is found to be 38.05 per cent, which implies relative capital mobility in the continent. However, there is a slight decline in capital mobility when compared to what was obtainable a decade ago. On average, the speed of adjustment has slightly increased (-0.25); convergence from short-run to long-run would take place within three (3) months in an instance of homogeneity. Nigeria and Malawi having the highest speed of adjustment (-0.57) among the countries in the global sample used. Meanwhile, Gambia happened to be the country with the highest capital mobility at the short-run. All these three (3) countries are Western-Africa countries, which means there are lessons to draw from them towards enhancing high convergence coefficient and increased capital mobility, especially, the management of their economic structures, savings and exchange rate policy. This paper concludes that there is an existence of relative capital mobility in Africa.