Understanding the sincerity nexus between nationalisation and economic prosperity

Abstract

Abstract The purpose of this study was to investigate the impact of nationalisation of mineral resources to economic development post nationalisation, by giving a balanced perspective across developing countries that have nationalised. The hypothesis of the study is that changes in macroeconomic variables before and after nationalisation has an impact on economic development. The research used the Generalized method of moments (GMM) and Granger causality model to understand the sensitivity of economic development from these macroeconomic indicators (commodity prices, government effectiveness, regulatory quality and exchange rate) pre and post nationalisation. The results show that prior nationalisation, all macro-economic variables were not statistically significant in driving economic development. Post nationalisation, government effectiveness, regulatory quality and exchange rate were still not statistically significant in driving economic development however the impact of commodity prices was significant in driving economic development. This suggests that post nationalisation; commodity prices movement is key in driving development. The second part of the analysis explored the granger causality impact of macroeconomic variables responsible to sustain economic growth post nationalisation. The results show that government effectiveness post nationalisation is significant in driving economic development. This implies that nationalisation improve economic development for as long as it is linked with improvement in government effectiveness and there is upswing in commodity prices.