Title: Effects of selected macroeconomic determinants on consumption expenditure in Sub-Saharan Africa

Authors: Raymond Kofi Adjei; Veronika Kajurová

Addresses: Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czechia ' Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czechia

Abstract: This paper investigates the macroeconomic determinants affecting consumption in Sub-Saharan Africa (SSA) using panel data from 2005 to 2018. Fixed effects models and dynamic fixed effects models are developed and analysed. The first model includes panel data for 25 SSA countries, considering consumption, foreign aid, foreign direct investment, international trade, and inflation. The second model incorporates a monetary policy element by adding money market interest rate. From the models derived, the paper reveals an empirical relationship between international trade and consumption, with trade having a negative effect on consumption which points to a different distribution than is expected. The dynamic fixed effects models respectively establish that past consumption has an effect on present consumption and that monetary policy through interest rate is negatively correlated with consumption. The significance of the other determinants is not proven, which could serve as meaningful information to policy makers when deciding about what really matters.

Keywords: consumption; Sub-Saharan Africa; SSA; foreign aid; foreign direct investment; international trade; money market interest rate; inflation; monetary policy.

DOI: 10.1504/IJSE.2022.122112

International Journal of Sustainable Economy, 2022 Vol.14 No.2, pp.167 - 196

Received: 13 May 2021
Accepted: 09 Aug 2021
Published online: 08 Apr 2022 *

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