Macroeconomic Drivers of Economic Growth in Africa: The Role of Monetary Policy, Exchange Rates, and Migration

Abstract

This study examines the macroeconomic determinants of economic growth in five African economies, over the period 2000 to 2025. Drawing on neoclassical, endogenous growth, and monetarist frameworks, the study evaluates how monetary variables, exchange rate dynamics, unemployment, and migration influence growth trajectories, with particular emphasis on nonlinear migration effects. A quantitative panel data approach is employed, utilizing generalized least squares estimation to address heteroskedasticity and serial correlation, while fully modified ordinary least squares is applied to validate long-run relationships and correct for endogeneity. Unit root tests confirm mixed orders of integration, justifying the use of robust panel estimation techniques. The empirical findings indicate that money supply and interest rates exert negative and statistically significant effects on economic growth, suggesting that excessive monetary expansion and high borrowing costs constrain investment and economic activity. Exchange rate effects are mixed, with short-run estimates indicating a negative impact, while long-run results reveal a positive and significant relationship, implying that exchange rate competitiveness supports export-led growth. Migration emerges as a key driver of economic growth, with both its linear and squared terms showing positive and significant effects, confirming the presence of increasing returns and highlighting the role of labor mobility, human capital accumulation, and knowledge spillovers. Unemployment shows a negative but statistically insignificant effect, reflecting structural labor market dynamics. The findings provide important policy implications, suggesting that prudent monetary management, stable exchange rate policies, and effective migration frameworks are essential for sustaining long-term economic growth in developing economies.