PANEL REGRESSION MODEL ON THE IMPACT OF SOME SELECTED MACROECONOMICS VARIABLES ON GROSS DOMESTIC PRODUCT IN AFRICAN COUNTRIES

Abstract

The Gross Domestic Product (GDP) of a country is a key indicator of its economic
performance and growth. In Africa, understanding the factors that influence GDP is
crucial for policymakers to make informed decisions that promote economic
development. This study aims to investigate the impact of these selected macroeconomic
variables on GDP in African countries using panel regression analysis. The study
investigates the relationship between selected microeconomic variables and gross
domestic product in African countries. Using panel regression models, the study analyzes
the impact of consumer price index (CPI), interest rate (IR), exchange rate (ER), and
trade balance (TB), on GDP across 54 African countries over the period 2010-2023. The
study specifically employs pooled regression, fixed effects (FE), and random effects (RE)
models. The Hausman specification test result revealed that the fixed- effect model is more
efficient for modelling the impact of some selected microeconomic variables (Housman
specification test statistic = 21.063, p < 0.05). The study revealed further that CPI has positive
and insignificant impact on GDP (B 1 = 0.016, p>0.05) while IR and ER has negative and
insignificant impact on GDP (B 2 = -0.414, p >0.05 and B 4 = -0.005, p >0.05). The study
also revealed that trade balance has positive and significant impact on GDP (B 3 = 3.748,
p<0.05). This implies that increase in trade balance significantly increase gross domestic
product of Africa countries for the period under study. Based on these findings, it was
recommended that government should improve monetary and fiscal policies and also promotes
economic stability.