Macroeconomic uncertainty, governance and development among emerging economies of Sub-Saharan Africa

Abstract

Purpose The study evaluates the effect of macroeconomic risk (uncertainty) on development (living standards and welfare of the people) among economies in Sub-Saharan Africa (SSA) for the period spanning 2000–2022. Design/methodology/approach Data were compiled from various sources and were analyzed using two-step system Generalized Method of Moments (GMM) estimation procedure. Findings Results indicate that macroeconomic risk or instability in key macroeconomic indicators pose a threat to the development of the sub-region, all other factors held constant. The study further reveals that in times of increased levels of macroeconomic risk, improved levels of effectiveness of governance, reduced rate of corruption, stable political environment and improved regulatory structures help in assuaging the threat to development. The results, again, show that instability in exchange rate, money supply, import price and inflow of foreign investment hinder development, all other things being equal. Practical implications The study underscores the need to empower economic management teams to pursue policies that ensure macroeconomic stability and strengthen governance/regulatory structures to improve living standards and welfare of the people in SSA. Originality/value The study focuses on a holistic measure of macroeconomic instability and development in evaluating the impact of uncertainty on living standards (socio-economic development), compared to related studies that assess economic growth. Furthermore, the moderating role of institutional quality in the surmised relationship is analyzed.