Nexus between being landlocked and living standards in Sub-Saharan African countries: A two-step System GMM analysis

Mekonnen Kumlachew Yitayaw, Habtamu Legese Feyisa, Wondmagegn Biru Mamo, Yohannes Kefale Mogess

Article ID: 1421
Vol 6, Issue 1, 2022

VIEWS - 1389 (Abstract) 492 (PDF)

Abstract


The ultimate objective of the study was to investigate the effects of being landlocked on the living standards in Sub-Saharan African (SSA) countries from 1991 to 2019. Adopting the two-step estimation technique of System GMM (generalized method of moments), the study found that being landlocked has a negative and significant effect on the living standards in SSA countries when using GDP per capita as the living standard measure. Moreover, the historical living standard experiences of SSA countries have a positive and significant influence on the current living standard level. In addition, the population growth rate has a positive and significant effect on the living standards in SSA countries. On the other hand, the official exchange rate, broad money as a percentage of GDP, and inflation have a negative and significant effect on the living standards in SSA countries. Generally, the estimated result reveals the existence of a significant variation in the living standards in landlocked and coastal SSA countries. This study suggests that regional integration between landlocked and transit countries should be improved to minimize entry costs and increase access to global markets for landlocked countries. We argue that this study is of interest to landlocked and coastal countries to increase trade integration and promote the development of both groups, and it will contribute to the scarce empirical evidence.


Keywords


GDP per capita; landlocked; living standard; Sub-Sahara Africa; System GMM

Full Text:

PDF


References


Acharya M and Basnet MBR (2019). “Relationship between inflation and economic growth of Nepal”. The Lumbini Journal of Business and Economics, 46.

Aghion P, Bacchetta P, Ranciere R and Rogoff K (2009). “Exchange rate volatility and productivity growth: The role of financial development”. Journal of Monetary Economics, 56(4): 494–513. https://doi.org/10.1016/j.jmoneco.2009.03.015

Ahmad A, Ahmad N and Ali S (2013). “Exchange rate and economic growth in Pakistan (1975-2011)”. Journal of Basic and Applied Scientific Research, 3(8): 740–746.

Ahmad N and Luqman M (2012). “A dynamic analysis of the relationship among inflation, investment, population growth, export and economic growth in Pakistan”. Asian Journal of Research in Business Economics and Management, 2(8): 175–182.

Arellano M and Bond S (1991). “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”. The Review of Economic Studies, 58(2): 277–297. https://doi.org/10.2307/2297968

Arvis J-F, Raballand G and Marteau J-F (2007). The Cost of Being Landlocked: Logistics Costs and Supply Chain Reliability. World Bank. https://doi.org/10.1596/1813-9450-4258

Aslam ALM (2016). “Impact of money supply on Sri Lankan economy: An econometric analysis”. International Letters of Social and Humanistic Sciences, 67: 11–17. https://doi.org/10.18052/www.scipress.com/ILSHS.67.11

Batu MM (2016). “Drivers of Ethiopian economic growth: A systematic review”. International Journal of Scientific and Research Publications, 6(3): 194–199.

Behera J (2014). “Inflation and its impact on economic growth: Evidence from six South Asian countries”. Journal of Economics and Sustainable Development, 5(7): 145–154.

Bloom DE, Canning D and Sevilla J (2003). The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change. Rand Corporation. https://doi.org/10.7249/MR1274

Bloom DE, Sachs JD, Collier P and Udry C (1998). “Geography, demography, and economic growth in Africa”. Brookings Papers on Economic Activity, 1998(2): 207–295. https://doi.org/10.2307/2534695

Bond SR (2002). “Dynamic panel data models: A guide to microdata methods and practice”. Portuguese Economic Journal, 1(2): 141–162. https://doi.org/10.1007/s10258-002-0009-9

Bosker M and Garretsen H (2009). “Economic development and the geography of institutions”. Journal of Economic Geography, 9(3): 295–328. https://doi.org/10.1093/jeg/lbn047

Bucci A (2015). “Product proliferation, population, and economic growth”. Journal of Human Capital, 9(2): 170–197. https://doi.org/10.1086/680861

Chen J (2012). Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992–2008) (PSE Working Paper HALSHS-00667467). HAL-SHS.

Chowdhury AK and Erdenebileg S (2006). Geography Against Development: A Case for Landlocked Developing Countries. United Nations Office of the High Representative for the Least Developed Countries (UN-OHRLLS).

Collier P (2008). The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It. Oxford University Press.

Cvrlje D and Ćorić T (2010). “Macro & micro aspects of standard of living and quality of life in a small transition economy: The case of Croatia”. EFZG Working Paper Series, (2): 1–12.

El-Ramly H and Abdel-Haleim SM (2008). “The effect of devaluation on output in the Egyptian economy: A vector autoregression analysis”. International Research Journal of Finance and Economics, 14: 82–99.

Faye ML, McArthur JW, Sachs JD and Snow T (2004). “The challenges facing landlocked developing countries”. Journal of Human Development, 5(1): 31–68. https://doi.org/10.1080/14649880310001660201

Federal Reserve Bank of Boston (2020). How Do We Measure “Standard of Living”? Federal Reserve Bank of Boston.

Furuoka F and Munir Q (2011). “Population growth and standard of living: A threshold regression approach”. Economics Bulletin, 31(1): 844–859.

Gagarawa MA and Mehrotra M (2017). “Impact of inflation on the living standard of public primary school teachers in Gagarawa Local Government Area, Jigawa State-Nigeria”. International Journal of Management and Social Sciences, 6(4): 327–335.

Gatawa NM, Abdulgafar A and Olarinde MO (2017). “Impact of money supply and inflation on economic growth in Nigeria (1973–2013)”. IOSR Journal of Economics and Finance (IOSR-JEF), 8(3): 26–37. https://doi.org/10.9790/5933-0803042637

Gnawali L (2019). “Money supply and economic growth of Nepal”. International Journal of Business and Management Research, 3(9): 133–149.

Goldberg WM (2018). The Geography, Nature, and History of the Tropical Pacific and its Islands. Springer. https://doi.org/10.1007/978-3-319-69532-7

Gorigledhzhan T (2014). The Influence of Landlocked Geographical Position and Transport Infrastructure on Economies of Sub-Sahara Africa [Bachelor’s Thesis, Erasmus University Rotterdam]. Erasmus University Thesis Repository.

Haller A-P (2012). “Concepts of economic growth and development. Challenges of crisis and knowledge”. Economy Transdisciplinarity Cognition, 15(1): 66–71.

Hasanović E and Latić T (2017). The Determinants of Excess Liquidity in the Banking Sector of Bosnia and Herzegovina (Working Paper No. 11-2017). Geneva Graduate Institute.

Hossin MS (2015). “The relationship between inflation and economic growth of Bangladesh: An empirical analysis from 1961 to 2013”. International Journal of Economics, Finance and Management Sciences, 3(5): 426–434. https://doi.org/10.11648/j.ijefm.20150305.13

Huang TH and Xie Z (2013). “Population and economic growth: A simultaneous equation perspective”. Applied Economics, 45(27): 3820–3826. https://doi.org/10.1080/00036846.2012.734596

Hussain ME and Haque M (2017). “The empirical analysis of the relationship between money supply and per capita GDP growth rate in Bangladesh”. Journal of Advances in Economics and Finance, 2(1): 54–66. https://doi.org/10.22606/jaef.2017.21005

International Economic Development Council (2000). Economic Development Reference Guide. International Economic Development Council.

International Telecommunication Union and UN-OHRLLS (2013). Chair’s Summary Adopted at the Thematic Meeting on Enhancing ICT Development and Connectivity for the Landlocked Developing Countries [Conference Summary]. Global South-South Development Expo Mini Partnership Forum, Nairobi, Kenya.

Kasidi F and Mwakanemela K (2013). “Impact of inflation on economic growth: A case study of Tanzania”. Asian Journal of Empirical Research, 3(4): 363–380.

Kogid M, Asid R, Lily J, et al. (2012). “The effect of exchange rates on economic growth: Empirical testing on nominal versus real”. IUP Journal of Financial Economics, 10(1): 7–17.

Mahara T (2020). “Money supply-economic growth nexus: Evidence from a landlocked country”. Quest Journal of Management and Social Sciences, 2(1): 132–153. https://doi.org/10.3126/qjmss.v2i1.29026

Marshal I (2016). “The link between money supply and economic growth in Nigeria: An econometric investigation”. International Journal of Economics and Business Management, 2(3): 42–51.

Masters W and Sachs J (2001). Climate and Development [Presentation]. Annual Meeting of the AEA, New Orleans, USA.

Mierau JO and Turnovsky SJ (2014). “Demography, growth, and inequality”. Economic Theory, 55: 29–68. https://doi.org/10.1007/s00199-013-0749-z

Miles W (2006). “To float or not to float? Currency regimes and growth”. Journal of Economic Development, 31(2): 91–105.

Morina F, Hysa E, Ergün U, et al. (2020). “The effect of exchange rate volatility on economic growth: Case of the CEE countries”. Journal of Risk and Financial Management, 13(8): Art. 177. https://doi.org/10.3390/jrfm13080177

Odumusor CJ (2019). “Impact of money supply on the growth of the Nigerian economy”. Journal of Economics and Finance, 10(1): 30–46.

Ogunmuyiwa MS and Ekone AF (2010). “Money supply-economic growth nexus in Nigeria”. Journal of Social Sciences, 22(3): 199–204. https://doi.org/10.1080/09718923.2010.11892802

Osuala AE, Osuala KI and Onyeike SC (2013). “Impact of inflation on economic growth in Nigeria—A causality test”. Journal of Research in National Development, 11(1): 206–216.

Peterson EWF (2017). “The role of the population in economic growth”. SAGE Open, 7(4): Art. 2158244017736094. https://doi.org/10.1177/2158244017736094

Phibian NO (2010). “The quantity theory of money: Evidence from Nigeria”. Central Bank of Nigeria (CBN) Economic and Financial Review, 48(2): 91–107.

Ping HUA (2011). The Economic and Social Effects of the Real Exchange Rate—Evidence from the Chinese Provinces [Presentation]. International Conference on Social Cohesion and Development, Paris, France.

Quartey P (2010). “Price stability and the growth maximizing rate of inflation for Ghana”. Modern Economy, 1(3): 180–194. https://doi.org/10.4236/me.2010.13021

Rodrik D (2007). “The real exchange rate and economic growth: Theory and evidence”. Brookings Papers on Economic Activity, 2008(2): 365–412. https://doi.org/10.1353/eca.0.0020

Sare YA, Ibrahim M and Musah A (2019). “Examining the threshold effects of inflation on economic growth in Ghana”. Ghanaian Journal of Economics, 7(1): 5–23.

Sethy SK and Sahoo H (2015). “Investigating the relationship between population and economic growth: An analytical study of India”. Indian Journal of Economics & Business, 14: 269–288.

Soubbotina TP (2004). Beyond Economic Growth: An Introduction to Sustainable Development (2nd Ed.). World Bank. https://doi.org/10.1596/0-8213-5933-9

Sulaiman LA and Migiro SO (2014). “The nexus between monetary policy and economic growth in Nigeria: A causality test”. Public and Municipal Finance, 3(2): 35–40.

Sultana N (2018). “Impacts of money supply, inflation rate, and the interest rate on economic growth: A case of Bangladesh”. Journal of Emerging Technologies and Innovative Research (JETIR), 5(10): 66–78.

Taglioni D, Winkler D, Athukorala PC, et al. (2016). World Investment Report 2013—Global Value Chains: Investment and Trade for Development. United Nations Industrial Development Organization.

Tarawalie AB (2010). “Real exchange rate behavior and economic growth: Evidence from Sierra Leone”. South African Journal of Economic and Management Sciences, 13(1): 8–25. https://doi.org/10.4102/sajems.v13i1.195

Timsina N (2014). Impact of Bank Credit on Economic Growth in Nepal (NRB Working Paper 22/2014). Nepal Rastra Bank.

Tumwebaze HK and Ijjo AT (2015). “Regional economic integration and economic growth in the COMESA region, 1980–2010”. African Development Review, 27: 67–77. https://doi.org/10.1111/1467-8268.12123

Ullah S, Akhtar P and Zaefarian G (2018). “Dealing with endogeneity bias: The generalized method of moments (GMM) for panel data”. Industrial Marketing Management, 71: 69–78. https://doi.org/10.1016/j.indmarman.2017.11.010

United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) (2014). Improving Trade and Transport for Landlocked Developing Countries. (World Bank-United Nations Report in Preparation for the 2nd United Nations Conference on Landlocked Developing Countries (LLDCs)).

United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) (2019). Landlocked Developing Countries: Things to Know, Things to Do. (World Bank-United Nations Report prepared for comprehensive high-level midterm review on the implementation of the Vienna Programme of Action for Landlocked Developing Countries for the Decade 2014–2024 held on 5 and 6 December 2019 in New York).

Wang G and Zou H (2011). “Inflation aversion and the optimal inflation tax”. Annals of Economics and Finance, 12(1): 13–30.

World Bank (2020). World Development Indicators. https://databank.worldbank.org/source/world-development-indicators

Yao W, Kinugasa T and Hamori S (2013). “An empirical analysis of the relationship between economic development and population growth in China”. Applied Economics, 45(33): 4651–4661. https://doi.org/10.1080/00036846.2013.795284




DOI: https://doi.org/10.24294/jipd.v6i1.1421

Refbacks

  • There are currently no refbacks.


Copyright (c) 2022 Mekonnen Kumlachew Yitayaw, Habtamu Legese Feyisa, Wondmagegn Biru Mamo, Yohannes Kefale Mogess

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This site is licensed under a Creative Commons Attribution 4.0 International License.