THE IMPACT OF MACROECONOMIC POLICY ON ECONOMIC GROWTH IN SUB-SAHARA AFRICAN COUNTRIES

The prime purpose of this article was to investigate the monetary and fiscal policy interaction and their impact on economic growth in a panel of 35 sub-Saharan African economies from 1980 to 2018. To achieve this objective, the study employs a Panel Vector Autoregression (PVAR) estimation technique. Using a PVAR approach, we show that an expansionary fiscal policy through tax revenue and an unexpected expansionary monetary policy via broad money supply have a positive effect on gross national income, whereas an expansionary fiscal policy through the government spending have a contractionary impact on gross national income. We also find that an unexpected expansionary monetary policy via real exchange rate has no effect on gross national income. Finally, we show evidence that there is a negative and significant relationship between fiscal policy and monetary policy and thus supporting the need of policy coordination between fiscal and monetary policies. Therefore, to have continuous and sustainable economic growth, the coordination of monetary and fiscal policies is vital, and the lack of this coordination leads to a sharp downturn of overall economic performance, even can hurt the economy The empirical results also show that the variation in gross national income is more explained by fiscal policy variables than monetary policy variables which show fiscal policy is more effective than monetary policy in influencing gross national income.