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. The work is based on the neoclassical, endogenous growth, and monetarist models and analyzes the roles of monetary variables, exchange rate behavior, joblessness, and migration on growth paths, focusing especially on the non-linear impact of migration. The quantitative panel data technique is used, and the generalized least squares estimation technique is used to handle the heteroskedasticity and serial correlation problems. Fully modified ordinary least squares estimation is used to test the long-run relationships and endogeneity problems. Mixed orders of integration are confirmed in the unit root tests, and this supports the use of robust panel estimation methods. The empirical results show that money supply and interest rate have a negative significant impact on economic growth, signifying that excess money supply and high interest rates limit investment expenditure and economic activity. Results for the short-term show a negative relationship between exchange rate effects and export growth, whereas the long-term results show a positive and statistically significant relationship, suggesting that greater competitiveness in the exchange rate promotes export growth. Labor mobility, human capital, and knowledge spillovers are suggested by the increasing returns, with both the linear and squared terms of migration being positive and significant, thus confirming the existence of increasing returns. The effect of unemployment is negative, but statistically insignificant, and indicative of structural labour market dynamics. The results offer valuable policy lessons: sound monetary policy, exchange rate stability, and good migration policies are key to ensuring long-term economic development in developing countries.