Causal Nexus among Fiscal Policy, Economic Growth and Income Inequality in Sub-Saharan African Countries (1995-2016)

Abstract

This paper investigates the causality among fiscal policy, economic growth  and income inequality in some twenty six  selected sub- African countries with a view to identifying the direction of causation among these variables;  thus aiding the identification of  policy choice variables whose impact could  predict the behaviour of some other variables. This  approach would ultimately provide solutions to  income inequality  and  economic  growth  problems  in sub-Saharan  African countries. To achieve this objective, the sub-Saharan African countries were divided into three–low income countries, lower  middle income countries and upper middle income countries. The methodology of multivariate Granger causality was  applied to investigate  the causality among fiscal policy, economic growth  and income inequality variables. The findings show that in low income countries and  lower middle income countries, no designable causality could be established among the three variables probably suggesting lack of effective policy cordination in SSA countries. However, a uni-directional causality running fron economic growth to income inequality was found  in upper middle income countries.