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The Macroeconomic Determinants of Economic Growth in Zambia: Do Copper prices matter?

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  • Chizonde, Bright

Abstract

This research investigates the determinants of economic growth in Zambia using the Bounds Approach to Cointegration developed by Persaran (1999). Since Zambia’s economy is said to be dependent on copper mining, economic analysts postulate that economic growth in Zambia is dependent on international copper prices and thus externally determined. This is somewhat problematic because it absorbs policy makers and government of the responsibility to generate sustainable growth. In order to test the validity of this postulation, the study estimates an Autoregressive Distributed Lags (ARDL) Model with copper prices as one of the variables of interest. Estimation results indicate that, in the long-run, economic growth is determined by physical capital, exchange rate, inflation, crude oil price, government spending and agricultural productivity; international copper prices only influence growth in the short-run. Therefore, with proper planning and strategic policy interventions, Zambia can still achieve higher sustainable economic growth even when international copper prices are falling.

Suggested Citation

  • Chizonde, Bright, 2016. "The Macroeconomic Determinants of Economic Growth in Zambia: Do Copper prices matter?," MPRA Paper 87854, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87854
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    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Olga Arratibel & Frigyes Ferdinand Heinz & Reiner Martin & Marcin Przybyla & Lucasz Rawdanowicz & Roberta Serafini & Tina Zumer, 2007. "Determinants of growth in the central and eastern European EU member states - a production function approach," Occasional Paper Series 61, European Central Bank.
    3. Arratibel, Olga & Heinz, Frigyes Ferdinand & Martin, Reiner & Przybyla, Marcin & Rawdanowicz, Lukasz & Serafini, Roberta & Zumer, Tina, 2007. "Determinants of growth in the central and eastern European EU member states - a production function approach," Occasional Paper Series 61, European Central Bank.
    4. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, April.
    5. Strike Mbulawa, 2015. "Determinants of Economic Growth in Southern Africa Development Community: The Role of Institutions," Applied Economics and Finance, Redfame publishing, vol. 2(2), pages 91-102, May.
    6. Mohammad Hashem Pesaran & Yongcheol Shin & Richard J Smith, 1999. "Bounds Testing Approaches to the Analysis of Long Run Relationships," Edinburgh School of Economics Discussion Paper Series 46, Edinburgh School of Economics, University of Edinburgh.
    7. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    8. World Bank, 2009. "Zambia Second Investment Climate Assessment," World Bank Publications - Reports 28066, The World Bank Group.
    9. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    10. Nikolaos Dritsakis & Erotokritos Varelas & Antonios Adamopoulos, 2006. "The Main Determinants of Economic Growth : An Empirical Investigation with Granger Causality Analysis for Greece," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 47-58.
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    More about this item

    Keywords

    Autoregressive Distributed Lags (ARDL) Model; copper prices; Economic growth; Zambia;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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