The Determinants of Economic Growth in Swaziland

This paper investigates whether the mentioned determinants of economic growth have contributed to the poor performance in Swaziland economic growth between 1965 and 2011 and if so which causal factors have contributed to this diminished economic performance. Time series data is used to test the unit root using Augmented Dickely Fuller (ADF) test. Then cointegration test and Vector Error Correction (VEC) Model were done respectively to account for the factors that influence the growth of Swaziland economy. The empirical results indicate that agriculture sector is statistically significant to GDP and have a positive relationship; however industry and service sectors are positively affecting economic growth although they are statistically insignificant. Physical capital formation and government expenditure are positively related to GDP growth; however, they are statistically insignificant. Export, nominal discount and foreign aid indicate negative relationship with GDP growth; nevertheless they are statistically insignificant. As found out in the study, it is recommended that formulating relevant policies and strategies would enhance these determinants to increase economic growth in the countryTable of Contents Acknowledgments i Dedication ii Abstract iii List of Tables vi List of Figures viii Chapter 1 Introduction 1 1.2 Problem Statement and Motivation 1 1.2 Objectives of the Study 6 Chapter 2 Literature Review 9 2.1 Economic Growth Theories 9 2.2 Human Capital as Source of Productivity Growth 12 2.3 The Contribution of Import and Export to Economic Growth 14 2.4 Domestic Savings, Investment and Growth 16 2.5 Other Determinant Factors for Growth 19 2.6 Determinants of Economic Performance 21 2.7 Empirical Study 26 Chapter 3 Structure of Swaziland Economy and its Challenges 28 3.1 Background of Swaziland Economy 28 3.2 Characteristics of the Economy 29 3.3 Comparisons with Developed and Developing Countries 43 3.3.1 Comparisons with other Developed Countries 43 3.3.2 Comparisons with other Developing Countries 48 3.4 Challenges Faced by Swaziland Economy 53 3.5 Structural Labor Changes in Swaziland 56 Chapter 4 Research Methodology 60 4.1 Econometric Model Specification (Vector Error Correction Model (VECM)) 61 4.2 Unit Root and The Augmented Dickely Fuller (ADF) Test 64 4.3 Cointergration Tests 68 Chapter 5 Data and Empirical Results and Analysis 71 5.1 Types of Data and Sources 71 5.2 Empirical Results and Analysis 72 Chapter 6 Conclusions 85 References 89 Annexes 9