Impact of Macroeconomic Factors on Total Factor Productivity in Sub-Saharan African Countries
This study explores the effects of macroeconomic factors on total factor productivity (TFP) in 34 sub-Saharan African countries for the period 1980-2002. The econometric analysis shows that external debt is negatively and significantly related to TFP. Other factors that have significant negative effect include inflation rate, agricultural value-added as a percentage of GDP, lending rate, and local price deviation from purchasing power parity. However, our result shows that human capital, export–GDP ratio, credit to private sector as percentage of GDP, foreign direct investment as percentage of GDP, manufacturing value-added as a share of GDP, and liquid liabilities as percentage of GDP have significant positive effect on TFP. Taken together, the result shows that policies that reduce population growth rate and debt facilitate greater openness, sound macroeconomic fundamentals, price stability, financial deepening, and greater private participation; would lead to higher TFP in the sub-Saharan region.