Innovation and volatility of the GDP growth rate: case of the economies of sub-Saharan Africa

Abstract

The objective of this research is to assess the impact of innovation on the volatility of GDP growth rate in the economies of Sub —Saharan African (SSA) countries. Using a dynamic panel model, a volatility index that we built and an innovation index produced by United Nations Industrial Development Organization (UNIDO), we show that innovation reduces the volatility of growth rates of GDP. In other words, the likelihood to control the volatility of GDP growth rate is an increasing function of innovation. There is a threshold effect of innovation effect on volatility depending to GDP per capita. Indeed, innovation reduces volatility but until a certain level of GDP per capita. This threshold is estimated at US $ 671 with a confidence level of 90% equal to US $ 600 - US $ 740. The effect of innovation on volatility is more efficient in a politically stable environment. Local innovation and innovation imported (foreign direct investment) have different behavior. The first reduces volatility while the second increases it.