Working Paper Series: Special Edition of 2016 to 2018 Interns

use of these payment systems will increase consumer spending which will increase the demand for goods and services and lead to a decrease in inventory, an increase in production, and a decrease in unemployment, thereby, facilitating growth. In terms of the control variables, Private sector credit to GDP (PSC) maintained a positive and significant coefficient in models 3 and 4 at the 1.0 per cent level. This supports the initial prediction of the model, given that private sector credit drives domestic consumption to a large extent, thereby strongly influencing domestic activity. Gross capital formation (GCF) was significant in all models at the 1.0 percent level, given the long-term impact of investments on GDP. Trade openness (TO) maintain a positive effect on per capita GDP but was only significant in the first two models, reflective of the nature of the economies. Government expenditure (GEXP) had a negative effect on growth in the first two models, consistent with expectations. However, the variable was statistically significant only in the first model. A possibly explanation for the significant result is that government expenditure drives domestic consumption and investments on one hand, while negatively impacting the trade balance due to the open nature of the domestic economies. In addition, public expenditure that is financed by taxation, negatively impacts domestic consumption. In addition to the Pooled OLS estimation, the Generalized Least Squares (GLS) 16 estimation was applied. The results are displayed in Table 6 in the Appendix. The results from the regression presented similar findings with that of the Pooled OLS, therefore, supporting the results that was put forward above.

16 The GLS is designed to produce an ideal unbiased estimator for situations with heterogeneous variance. The model assumes that there is cross sectional dependence given the single financial space and currency; among other things.

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