• Sub-Saharan Africa
• Liberalisation
• Growth
• Development
• Cointegration

Research on economic growth and development in developing countries has often highlighted the role of liberalisation policies (economic and political) in improving economic performance in the developing world. In sub-Saharan Africa, in particular, efforts at fostering economic growth and development have not only resulted in the adoption of these policies, but have also led to the proliferation of regional economic integration (include monetary unification). Nonetheless, the impact of these policies on economic performance continues to be a subject of debate among policy makers, development partners, academic researchers, and the international community at large. This debate has become increasingly important in light of the challenges facing the aforementioned agents in helping to improve the economic performance of these countries. This thesis focuses on this topic providing empirical evidence for sub-Saharan African countries.

The first chapter uses post-liberalisation data on Ghana and focuses on the extent to which trade openness and foreign aid inflows impact on economic growth. Ghana, being one of the forerunners to adopt liberalisation policies in sub-Saharan Africa, has received commendations from the international community for its post-liberalisation economic growth performance. This has increased government commitment in recent years to open the economy to international competition. Moreover, foreign aid inflows over the period have been relatively large.
The study, which employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration, provides empirical findings, which clearly indicate that the impact of both trade openness and foreign aid on Ghana's post-liberalisation economic growth is positive and statistically significant in both the short-run and the long run, although this is somewhat reduced by their interaction. In addition, the study reveals long run economic growth benefits of Ghana's political system whilst government spending and labour force performance retarded economic growth over the study period. The empirical findings and policy recommendations are relevant for Ghana's long-term economic growth policy reforms.

The second chapter, taken cognisance of the fact that sub-Saharan Africa has been characterised by low-income levels for decades, analyses the impact of economic globalisation and democracy on income levels in the area using panel cointegration techniques. The study considers a composite indicator for economic globalisation and several indicators of democracy and highlights the essence of the simultaneous adoption of economic globalisation and democracy for sub-Saharan African countries. The empirical results, based on a sample of 31 countries over the period 1980-2005, clearly indicate that, whilst the total long run impact of economic globalisation on income levels has been beneficial, the total long run impact of democracy has been the bane of the level of income in sub-Saharan Africa. The study concludes that policy reforms should be aimed at improving democratic institutions in sub-Saharan Africa for its potential benefits to be realised

The third chapter focuses on the implications of trade openness, foreign aid and democracy for the fulfilment of Wagner's law in West African Monetary Zone (WAMZ) countries. Although the impact of trade openness, foreign aid and democracy on government expenditure in developing countries has been emphasised in the literature in recent decades most recent studies of Wagner's law have often neglected the increasing role played by these policy variables. The study provides an empirical analysis of the long run implications of trade openness, foreign aid and democracy for the fulfilment of Wagner's law in WAMZ countries using panel data techniques for the period 1980-2008. The study finds the existence of Wagner's law in WAMZ countries, but only when the role of these policy variables has been catered for. The analysis concludes that, if these countries are to meet the fiscal convergence criteria and ensure the sustainability of a single currency area, explicit sets of restraint on the national authorities and innovative and efficient ways of domestic revenue generation necessary to ensure that government revenue keep pace with its expenditure become crucial, because the monetary union by itself may not necessarily ensure fiscal discipline.

The fourth chapter focuses on the relationship between democracy, government spending, and economic growth. Although, economic theory predicts that various core functions of governments are growth enhancing, its spending in non democratic countries often goes beyond these core functions, namely into rent-seeking and non-productive activities. The study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration to investigate the extent to which democracy and government spending have had an impact on economic growth in Ghana over the period 1960-2008. The empirical results obtained are encouraging, revealing support for the high efficiency of government spending in democracies hypothesis. The study demonstrates that democracy and government spending go hand in hand in providing a complementary role to impact positive on economic growth in Ghana in both the long-and short-run.

The fifth chapter investigates the impact of trade openness on economic growth and development for a sample of 85 middle-income countries over the period 1970-2009. The study employs non-stationary heterogeneous panel cointegration techniques that take into consideration the impact of cross-section dependence. The analysis reveals four important findings. Firstly, that trade openness has been one of the main drivers of the level of development, but not of economic growth in middle-income countries. Secondly, that trade openness is both a cause and a consequence of the level of development in middle-income countries. Thirdly, that neglecting the impact of cross-section dependence overestimates the coefficient linked to the long-run relationship between trade openness and development. Lastly, and most importantly, that these results are consistent for all the 20 middle-income sub-Saharan African countries included in the sample.