Export Commodity Prices and Long-Run Growth of Primary Commodities-Based African Economies
The impact of commodity prices on growth dynamics is evaluated in this paper, especially concerning selected primary commodities based African economies. Firstly, the conditions for different impacts of primary commodity prices on growth are explained. The patterns of impacts of commodity prices are associated with their economic structures and the nature of diversification in primary commodities export. The regression analysis shows that primary commodity prices have inelastic positive effects on economic growth of selected African countries. Consequently, an increase in prices of these commodities enhances economic growth less proportionality. Apart from this, an adjustment of African economies when there is short run disequilibrium, emanating from price changes for instance, is weak. Hence, the study recommends African countries to, as a matter of urgency, intensify efforts at mobilizing domestic resources and diversify their economies. This is not only limited to diversifying the primary commodity export base but their production base as well. This will go a long way to minimize external shocks since domestic resources are more reliable and can be controlled than exogenous external resources.