Real Interest Rate, Investment and Economic Growth: Panel Evidence from West African Monetary Zone

Main Article Content

Umunna Godson Nwagu
Chika Priscilla Imoagwu
Chinwe Ann Anisiobi
Amos Jeremiah Nwoba

Abstract

Purpose: This paper investigated the effect of interest rate on investment and growth on countries under the West African Monetary Zone (Gambia, Sierra Leone, Nigeria, Ghana, Guinea and Liberia) with the use of Panel data analysis from 2000 to 2021.


 


Approach/Methodology/Design: The study uses the Levin and Lin test to confirm the unit root of the selected variables. The stationarity shows that real interest rate, exchange rate, inflation and term of trade are integrated at levels and real gross domestic product, investment, and savings are integrated at order one. Also with the use of Kao Panel Co-integration test, it was confirm that there exists a long run relationship among the variables.


 


Findings: The study revealed that real interest rate shows a non-significant relationship to both investment and growth in the countries under the West African Monetary Zone (WAMZ). According to the study, these countries need to reduce their real interest rates in order to increase investment in WAMZ, particularly Ghana, Gambia, and Liberia, as a result of the findings. It is imperative that policy makers in West African Monetary Zone (WAMZ) countries implement policies that will contribute to the achievement of the threshold inflation rate consistent with higher economic growth.


Originality/Value: In this study, Panel data analysis has been estimated and after the test of hausman test the random effect method was used to carry out the estimation to know the impact of real interest rate on investment and economic growth with evidence for West African Monetary Zone for the period 2000 to 2015.

Article Details

How to Cite
Nwagu, U. G., Imoagwu, C. P. ., Anisiobi, C. . A. ., & Nwoba , A. . J. . (2023). Real Interest Rate, Investment and Economic Growth: Panel Evidence from West African Monetary Zone. Journal of Advanced Research in Economics and Administrative Sciences, 3(4), 21-36. https://doi.org/10.47631/jareas.v3i4.556
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Articles
Author Biographies

Umunna Godson Nwagu, Department of Economics, University of Nigeria, Nsukka, Nigeria

Department of Economics

Chika Priscilla Imoagwu, Department of Economics, Nnamdi Azikiwe University, Awka, Nigeria

Department of Economics