Underscoring the Agents of Sustainable Growth in Developing Countries: The Case of Senegal

Abstract

This paper uncovers the macroeconomic factors of economic growth in Senegal utilizing data from 1974 to 2019. It employs the ARDL model, Bound test, and the Toda-Yamamoto causality approach to analyze the relationships among variables. The findings reveal that external debt positively influences GDP growth in the long run, while foreign direct investment (FDI) positively affects it in the short time frame. Toda-Yamamoto causality results indicate bidirectional causality between GDP growth and inflation, external debt, and foreign aid, whereas a unidirectional causality runs from FDI to GDP growth. The findings of the research gauge that policymakers should consider FDI and external debt as crucial tools to promote economic growth in developing countries such as Senegal.