Nonlinearity and the Unit Root Hypothesis for African Per Capita Real GDP

Abstract

Once described as an epic center of growth tragedy, African nations have lately achieved relatively rapid growth rates, which have raised hopes that the continent is finally on the path to economic convergence with other emerging economies. However, there is a need to establish whether stabilization policies for the purpose of enhancing the GDP are effective in African countries. One of the means of examining the effectiveness of these policies is through the investigation of the unit root properties of per capita GDP in the continent. This study aims to add to the existing papers on GDP in African countries by investigating the non-stationarity of per capita GDP in 52 African countries, while using a newly proposed nonlinear unit root test. The results suggest that per capita GDP follows the non-stationarity process in half of the entire sample.

Key Words:

• Real GDP per capita
• African countries
• non-stationarity
• nonlinearity
• smooth transitions
• nonzero location parameter

JEL Classifications:

• C22
• O11
• O55

Acknowledgements

The authors are grateful to two anonymous referees and the editor of the journal for their constructive comments and suggestions that helped to improve the quality of this paper. The usual disclaimer applies.

Notes

1 African countries constitute 53 of the 145 countries in the World Bank classification. The list can be found in http://data.worldbank.org/about/country-classifications/country-and-lending-groups

2 Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Cote D'Ivoire, Democratic Republic of the Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mauritania, Mali, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somali, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia and Zimbabwe. The data for Algeria, Angola, Djibouti, Seychelles, Somalia, Sudan, Sao Tome and Principe and Swaziland started in 1970, while the data for Eritrea started in 1990.

3 Therefore, the reason for stationarity may be an interesting topic for future research.