Government Spending and Money Supply Roles in Alleviating Poverty in Africa

Abstract

This study examines the roles of government spending and money supply on alleviating poverty in Africa. The study used 48 Sub-Saharan Africa countries from 2001 to 2017. The study employed one step and two-step system GMM and found that both the procedures have similar results. Different specifications were employed and the model selected was robust, with valid instruments and absence of autocorrelation at the second order. The study revealed that government spending and foreign direct investment have significant negative influence on reducing poverty while money supply has positive influence on the level of poverty in the region. The implication of the finding is that monetary policy tool of money supply has no strong influence in combating the menace of poverty. The study therefore recommends that emphasis should be placed on increasing more of government spending that would impact on the quality of life of the people in the region through multiplier effect, improving the financial system for effective monetary policy and attracting foreign direct inflows through enabling business environment in Africa.