Economic distance and cross-country spillovers among African economies: Implication for growth and Development

Abstract

This study examines the level of linkage between Nigeria and some selected African countries on one hand and the linkages between economic growth, inflation, and unemployment on the other hand, in these economies. The study covers the period between 2000 and 2019. The study aims to first measure the economic distance between Nigeria and these countries using the approach proposed by Mazurek. Second, the degree of spillovers was characterized between Nigeria and these countries, using a VAR-based spillover index method proposed by Diebold and Yilmaz. The main finding of the study is that the selected African economies are quite economically dispersed, and the level of cross-border spillover is negligible. This would suggest that growth in one economy has not been influenced by the growth in the other economies in the region. Given this, the study recommends that policies that will improve intra-African trade should be formulated. Such policies should incorporate a trade-by-barter-like framework, where Africa can demand what it produces and produce what it demands. Essentially, much more attention should be paid to the supply side of the market than the demand side following the Says law that increasing production will naturally result in proportionate increase in demand. To achieve this, enabling environment should be created to engender technological innovations while improving human and capital infrastructures. summary statistics of variables of interest. After testing for stationarity using ADF test statistics, he employed the Pearson Correlation to test for the degree of association between the indicators. He also tested for group cointegration using the Pedroni Panel Cointegration approach. Further, the results of the unconditional correlation are then used to evaluate both the relative and group economic distance. And finally, the level of connectedness was examined among countries of interest using Diebold and Yilmaz's (2009, 2012, 2014) spillover indices.