article · Journal of Public Administration Finance and Law
An investigation into 48 Sub-Saharan African countries between 2001 and 2017 evaluates the effects of government spending and money supply on regional poverty alleviation. Using one-step and two-step system generalised method of moments estimations, the analysis explores how fiscal policy, monetary mechanisms, and foreign direct investment interact with poverty rates. The findings reveal that government spending and foreign direct investment exert a significant negative influence on reducing poverty, while money supply exerts a positive influence on poverty levels. These outcomes indicate that money supply serves as an ineffective monetary policy instrument for poverty reduction in the region. Consequently, the research recommends expanding government spending that boosts quality of life through multiplier effects, strengthening regional financial systems to ensure effective monetary policy, and fostering enabling business environments to attract foreign direct investment.
Understanding how macroeconomic levers impact living conditions helps policymakers design effective poverty reduction frameworks. By assessing fiscal spending, foreign investment, and monetary tools across Sub-Saharan Africa, these insights highlight the limitations of relying purely on money supply adjustments. This enables regional development organisations and finance ministries to focus resources on targeted public investments and financial system improvements.
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This study examines the roles of government spending and money supply on alleviating poverty in Africa. The study used 48 Sub-Saharan Africa countries from 2001 to 2017. The study employed one step and two-step system GMM and found that both the procedures have similar results. Different specifications were employed and the model selected was robust, with valid instruments and absence of autocorrelation at the second order. The study revealed that government spending and foreign direct investment have significant negative influence on reducing poverty while money supply has positive influence on the level of poverty in the region. The implication of the finding is that monetary policy tool of money supply has no strong influence in combating the menace of poverty. The study therefore recommends that emphasis should be placed on increasing more of government spending that would impact on the quality of life of the people in the region through multiplier effect, improving the financial system for effective monetary policy and attracting foreign direct inflows through enabling business environment in Africa.
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DOI: 10.47743/jopafl-2024-33-3
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