Balancing the Imbalances in Africa’s Root to Economic Development: Does the Business Environment Matter

Abstract

AbstractThis study employed the Newey West and Quantile Regression estimators on data spanning the period 2004 to 2019 for 35 selected African countries to determine the role of the business environment in achieving sustainable economic growth and development in Africa. The study uses three variables to denote the business environment, including but not limited to the business extent disclosure index, the cost of business start, and the time required to start a business. Additionally, the study included three macroeconomic indicators, such as the lending interest rate, the inflation rate, and the official exchange rate together with net inflows of foreign direct investment. The results reveal that the business extent disclosure index and the inflation rate stimulate economic growth in Africa. In contrast, the higher cost associated with starting a business, the longer time required to start a business, higher lending interest rates, exchange rate volatility, and net foreign direct investment inflows have growth-limiting effects on African economies. The findings provide practical implications for policy change toward addressing the loopholes in Africa's quest for sustainable economic growth and development.