The relation between capital formation and economic growth: evidence from sub-Saharan African countries

Journal of Economic Policy Reform

DOI:
10.1080/17487870.2013.799916

Eberechukwu Unezea

Abstract

This paper examines the causal relationship between capital formation and economic growth in Sub-Saharan African countries using recent panel cointegration and causality testing techniques. We find that causality is bi-directional, suggesting that higher economic growth leads to higher capital formation and that in turn, increases in capital formation results in higher economic growth. These results hold irrespective of whether capital formation is measured with private fixed capital formation or by gross capital formation.

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