A VECM and Cointegration Analysis on the Impact of Structural Adjustments on Manufacturing Growth in Malawi : Do Institutional Reforms Matter?

Malawi has been implementing structural adjustment reforms since 1981 in search of a way to revive its declining economic growth triggered by the oil shocks and general world economic recession of the late 1970s. The structural adjustment policies (SAPs) have primarily been meant to re-orient the economy's production base away from primary commodities towards manufactured exports. This paper using cointegration analysis and error correction mechanism (ECM) techniques, tests whether the economic reforms have achieved this objective. The paper finds significant one time and for all SAP effects on manufactured exports with institutional reform intensity observed to significantly improve the positive effects thereby providing a strong case for implementing institutional policy reforms alongside SAPs for the latter's improved efficacy