The Nexus of Institution and Stochastic Growth in Sub- Saharan Africa

The study examines the contribution of institution explained by aggregated index for the six governance clusters measured by WGI and individual level of each indicator on the stochastic growth behavior of SSA countries using data from forty two SSA countries over a period of 1996 to 2014. The study employed Arellano-Bond (1991) and Arellano-Bover (1995) dynamic panel generalized method of moments (GMM) technique of estimation. The estimated result suggested that variables such as foreign aid public investment consumption imported capital good inflation control of corruption rule of law voice and accountability political stability government effectiveness regulatory quality and institution are significant and positively contribute to stochastic growth performance in the region across each models. On the other handoutward trade policy negatively contributes to SSA Stochastic growth behavior. Moreover FDI has no significant contribution in the study period. A major policy implication arising from the results is that the advancement of institution and individual level of good governance are fundamental to the realization of sustained economic growth in SSA.