nep-afr New Economics Papers
on Africa
Issue of 2007‒06‒02
twelve papers chosen by
Suzanne McCoskey
Foreign Service Institute, US Department of State

  1. The Prospects for Sustained Growth in Africa: Benchmarking the Constraints By Simon Johnson; Jonathan D. Ostry; Arvind Subramanian
  2. Building Supervisory Structures in Sub-Saharan Africa--An Analytical Framework By Marc Quintyn; Michael Taylor
  3. Realizing the Demographic Dividend: Is Africa any different? By David E. Bloom; David Canning; Günther Fink; Jocelyn Finlay
  4. South Africa’s School Infrastructure Performance Indicator System By Jeremy Gibberd
  5. The CFA Arrangements--More than Just an Aid Substitute? By Etienne B. Yehoue
  6. Assessing Competitiveness After Conflict: The Case of the Central African Republic By Said Bakhache; Kadima D. Kalonji; Mark Lewis; Jean-Claude Nachega
  7. Gender Issue and Water Management in the Mediterranean Basin, Middle East and North Africa By Giulia Minoia
  8. Modeling and Forecasting the Malawi Kwacha-US Dollar Nominal Exchange Rate By Simwaka, Kisu
  9. A Model of Ethnic Conflict By Joan Esteban; Debraj Ray
  10. Diversification of peri-urban small farms toward fruit production in Yaoundé (Cameroon). Consequences for the development process and research. By Sandrine Dury; Ludovic Temple
  11. Yemen: Exchange Rate Policy in the Face of Dwindling Oil Exports By Faisal Ahmed; Nabil Ben Ltaifa; Todd Schneider; Saade Chami
  12. Can a Rule-Based Monetary Policy Framework Work in a Developing Country? The Case of Yemen By Selim Elekdag; Nabil Ben Ltaifa; Todd Schneider; Saade Chami

  1. By: Simon Johnson; Jonathan D. Ostry; Arvind Subramanian
    Abstract: A dozen countries had weak institutions in 1960 and yet sustained high rates of growth subsequently. We use data on their characteristics early in the growth process to create benchmarks with which to evaluate potential constraints on sustained growth for sub-Saharan Africa. This analysis suggests that what are usually regarded as first-order problems -- broad institutions, macroeconomic stability, trade openness, education, and inequality -- may not nowbe binding constraints in Africa, although the extent of ill-health, internal conflict, and societal fractionalization do stand out as problems in contemporary Africa. A key question is to what extent Africa can rely on manufactured exports as a mode of "escape from underdevelopment," a strategy successfully deployed by almost all the benchmark countries. The benchmarking comparison specifically raises two key concerns as far as a development strategy based on expanding exports of manufactures is concerned: micro-level institutions that affect the costs of exporting, and the level of the real exchange rate -- especially the need to avoid overvaluation.
    JEL: O10 O11 O43 O55
    Date: 2007–05
  2. By: Marc Quintyn; Michael Taylor
    Abstract: Current trends in financial sector development in sub-Saharan Africa are prompting policymakers to focus on the design of appropriate supervisory structures. Against the backdrop of worldwide efforts to remodel supervisory structures, this paper develops an analytical framework for designing a regulatory strategy that could assist in prioritizing the needs for regulation and supervision over time. Such a strategy should facilitate the design of a supervisory structure suitable for an individual country's current and future needs. The paper emphasizes that in the case of sub-Saharan Africa, any such strategy is constrained by the reality of capacity limitations and should take into account the need to keep the central bank involved in the process. Building on the framework, the paper identifies a number of supervisory structures that could meet sub-Saharan Africa's needs.
    Keywords: Bank supervision , Sub-Saharan Africa , Financial sector , Absorptive capacity ,
    Date: 2007–01–31
  3. By: David E. Bloom; David Canning; Günther Fink; Jocelyn Finlay (Harvard School of Public Health)
    Abstract: The goal of this paper is to test whether the determinants of growth in general, and the effects of demography in particular, are different in Africa than for the rest of the world. We show that most Sub-Saharan countries have the potential to reap the benefits of the demographic dividend, but that solid institutional settings will be imperative for its realization.
    Keywords: growth, Africa, Demographic Dividend, demography, sub-saharan.
    Date: 2007–05
  4. By: Jeremy Gibberd
    Abstract: While some South African schools have excellent infrastructure, others lack basic services such as water and sanitation. The school infrastructure performance indicator system (SIPIS) project offers an approach that can address both the urgent provision of basic services as well as support the development of more sophisticated and more effective education environments over time.
    Keywords: evaluation, learning environment, educational buildings, school infrastructure
    Date: 2007–05
  5. By: Etienne B. Yehoue
    Abstract: The CFA franc zone has had one of the longest experiences with a fixed exchange rate for a convertible currency and regional integration of any group of developing countries. France, the anchor country, provides aid to support the zone. This paper asks whether the arrangements are more than just an aid substitute. The paper addresses this issue by evaluating the overall performance of the zone over the period 1960-2004. The analysis reveals that when the zone is hit by a negative shock, France increases its aid, thereby acting as a shock absorber. However, it also finds that the zone displays strong performance in two areas-price stability and fiscal policy. Thus the paper concludes that the arrangements are not an aid substitute; they have real macroeconomic value for the zone and complement aid.
    Keywords: Monetary unions , Africa , Risk management , Development assistance , Fiscal policy , Price stabilization , International cooperation ,
    Date: 2007–02–01
  6. By: Said Bakhache; Kadima D. Kalonji; Mark Lewis; Jean-Claude Nachega
    Abstract: This paper assesses competitiveness in the case of the Central African Republic, a postconflict country. The paper presents several conventional techniques for assessing competitiveness, namely the real exchange rate and recent trade performance. Several other measures are considered, in particular transport costs and governance measures, which may be more effective in capturing the obstacles to competitiveness posed by the poor security environment and weak institutions common to many post-conflict situations. The real exchange measure and trade measures suggest some mild erosion of competitiveness in recent years, while the other measures indicate that the competitiveness challenges faced by the Central African Republic are much deeper.
    Keywords: Competition , Central African Republic , Foreign exchange , Trade , Transport , Governance ,
    Date: 2007–01–17
  7. By: Giulia Minoia (Fondazione Eni Enrico Mattei)
    Abstract: This article aims to investigate some aspects of the social process related to water resources management and gender relations. Given that gender and water management are interrelated issues exposed to a growing attention at the international level, it is therefore necessary to identify relations between the academic literature, the institutional framework and the field-based research. This document has been inspired by the Nostrum DSS project (Network on Governance, Science and Technology for Sustainable Water Resources Management in the Mediterranean), a Co-ordination Action funded by the European Commission, which involves eighteen partners from the North and South shores of the basin. As the scope of the project is to disseminate Best Practice Guidelines for the design and implementation of Decision Support System tools (DSS) to identify optimal water resources management regimes, this article is proposing an analysis of a particular geographical and social frame related to the social actors involved in the project, but there are no connections between the paper and the project itself. To create a network between science, policy and civil society is one of the main objectives of the project in order to reach an improved governance and planning in the field of sustainable water management. Therefore, to investigate gender sensitivity in some areas of the basin shall provide a clue. This overview of academic and institutional background refers to a particular geographical and cultural area, the Middle Eastern and North African region. In the first section lies the theoretical background, that has been extrapolated from international organisations guidelines and scholars’ publications. The second section is specifically focused on the Egyptian geographical context. The first paragraph presents a review of the guidelines suggested by international organisations related to policies on gender and water, as parts of the changes that the global scenario has recently been facing, with the shift from the micro level to the macro level. The second paragraph then describes the side effects of these overspread trends, which are identified in their missing relations with the social context of the intervention. The third and fourth paragraphs introduce the issue of women’s role in water management in the Middle Eastern and North African Regions, while highlighting relations between women’s involvement in the public sphere and the role they cover in local communities organisations. The proportion of the political representation faced by women in this region is also discussed, tackling their overspread participation in agriculture and their unrecognised working status. The fifth paragraph of this paper will discuss a case study in Egypt, concerning an initiative promoted by international donors and the government aimed at increasing community participation in the design and management of irrigation canals. The case study gives a concrete sample to discuss plusses and problems of women’s participation in water users organisations, synthesising many of the theoretical issues that have been raised in the first three parts of this article.
    Keywords: Irrigation, Gender, Regional Development Policy
    JEL: J16 Z13
    Date: 2007–04
  8. By: Simwaka, Kisu
    Abstract: This study develops a blended version of the monetary and portfolio models for the MK/USD exchange rate, and assesses the forecasting performance of the model against a simple random walk. The results indicate that the model performs better than the simple random walk on the 6, 12 and 24 months forecasting horizons. However, the model does not perform well on the 3-month horizon, which is supported by theory suggesting that exchange rate movements are not driven by fundamentals in the short term. We also add a variable drift term to the random walk process and compare its performance against both the simple random walk and the fundamental model. The results show that random walk (with a variable drift) performs better than the other models in out-of-sample process at both short term and long term horizons. This result suggests that this (the random walk with a drift) process might be the best tool for exchange rate forecasting on all the forecast horizons. When it comes to exchange rate forecasting in the long term, a fundamental model might still be the best alternative. Regarding the structural model (with fundamental determinants of nominal exchange rate), the empirical results indicate that a worsening current account balance and decreases in net external flows result the depreciation of exchange rates. This is in line with practical experience. On the other hand, higher domestic interest rates have an insignificant impact on exchange rate. In an economy with several structural bottlenecks and poor infrastructural services, high interest rates cannot be expected to induce capital flows. A rise in domestic inflation is associated with a deprecated exchange rate. Lastly, consistent with theoretical expectations, another significant finding is that an easing in monetary policy (increase in money supply growth) is associated with a depreciation of the exchange rate. These findings lead us to make the following conclusions. Developments in the current account balance have implications on the exchange rate market. Measures aimed at improving the current account position, for example through exports, are also instrumental in stabilizing the exchange rate – through appreciation. Considering that Malawi has been traditionally depending on tobacco as its chief foreign exchange earner, and taking into account the anti-smoking campaign militating against the crop amidst low prices, it is imperative that Malawi should diversify into other foreign exchange earner (for instance tourism) in order to ensure macroeconomic stability, which itself is a pre-requisite for economic growth and therefore poverty reduction. Thus, policies that influence exports and imports of goods and services also determine exchange rate movements. Likewise, prospects concerning funding for a donor aid dependent economy like ours may influence the direction of market forces in determining the exchange rate movements. Big swings in external funding could cause instability Therefore, government’s credibility regarding the use of external public funds and implementation of related reforms is important in as far as stability of the foreign exchange market and overall macroeconomic stability are concerned. The insignificant impact of higher domestic interest on attracting capital flows calls for the need for government to address some structural bottlenecks. For instance, infrastructure services such road network and utilities (electricity and water supply) require improvement. Otherwise, currently, Malawi needs lower interest rates in order to reduce the cost of credit necessary for private sector development. The general picture from the results is that developments in the external sector of the economy, which are not under the ambit of domestic authorities, probably contributed more to fluctuations of the Malawi kwacha. If indeed the above diagnosis is accurate, the policy implications of government’s ability in influencing the behavior of the exchange rate is limited. This is because the ability of a small economy like that of Malawi to fully insulate itself from external shocks is constrained. It will mainly be confined to limiting the contributions of inconsistencies in domestic policy and administering some confidence building measures, at least in the short-term-to medium term It is worthy to note that divergent opinions exist as to the usefulness of devaluation (or depreciation) as a policy tool. There are those that believe devaluation as a policy tool can boost exports and so crate jobs. It should be noted however that since the kwacha was floated in 1994, it has been on a depreciating trend almost continuously without corresponding gains from the export sector. Without losing sight of the interest of exporters, it should be noted that a depreciated kwacha has implications in terms of increased import expenditures (oil import bill), government debt service, domestic inflation and cost of imported intermediate inputs. In the short term, what we should strive as a nation is to have a stable Malawi kwacha exchange rate. In the long run, the viable option is in ensuing a competitive export market is increased productivity among exporting firms. This may include export diversification and implementing measures to limit market imperfections.
    JEL: F31 F00
    Date: 2007–05–25
  9. By: Joan Esteban; Debraj Ray
    Abstract: We present a model of conflict, in which discriminatory government policy or social intolerance is responsive to various forms of ethnic activism, including violence. It is this perceived responsiveness ? captured by the probability that the government gives in and accepts a proponed change in ethnic policy?that induces individuals to mobilize in support for their cause. Yet, mobilization is costly and demonstrators have to be compensated accordingly. Individuals have to weigh their ethnic radicalism with their material well-being to determine the size of their money contribution to the cause. Our main results are: (i) a one-sided increase in radicalism or in population size increases conflict; (ii) a one-sided increase in income has ambiguous effects depending on the elasticity of contributions to income; (iii) an increase in within-group inequality increases conflict; and (iv) an increase in the correlation between ethnic radicalism and inequality also increases conflict.
    Date: 2007–05–22
  10. By: Sandrine Dury (MOISA - Marchés, Organisation, Institutions et Stratégies d'Acteurs - [CIRAD : UMR99][IRD][INRA][IAMM] - [Ecole Nationale Supérieure Agronomique de Montpellier]); Ludovic Temple (Horticulture - Horticulture - [CIRAD : UPR27])
    Abstract: La croissance urbaine en Afrique a entraîné une augmentation de la demande de consommation pour les fruits et légumes, de nombreuses modifications des systèmes de production périurbains et une diversification des revenus des populations rurales. Dans la zone péri-urbaine de Yaoundé, les systèmes de productions se sont transformés d'une agriculture d'autosubsistance vers une agriculture commerciale. Certaines zones se sont également spécialisées, en particulier vers la production d'agrumes. Cette spécialisation spatiale, ne s'est pourtant pas accompagnée d'une spécialisation des exploitations. Les petites et moyennes exploitations continuent à cultiver plusieurs espèces de plantes pérennes et annuelles dans des systèmes agroforestiers complexes. A partir de l'observation d'un village situé dans la zone de production de clémentines d'Obala, situé à 60 km au nord de Yaoundé, cette étude se propose (1) d'étudier les déterminants historiques et économiques de cette spécialisation (ii) d'en évaluer les conséquences au niveau des exploitations et (iii) de tirer des recommandations pour l'orientation de la recherche et du développement.
    Keywords: Diversification - Fruits - Cameroun - Innovation - Péri-urbain - Modelisation
    Date: 2007–05–22
  11. By: Faisal Ahmed; Nabil Ben Ltaifa; Todd Schneider; Saade Chami
    Abstract: This paper investigates the likely implications of declining oil production on Yemen's equilibrium exchange rate, and discusses policy options to ensure a smooth transition to a nonoil economy. The empirical results suggest that, as oil production and foreign exchange earnings fall, the Yemeni rial will have to adjust downward in real effective terms to keep pace with the equilibrium exchange rate. In light of strong pass-through from exchange rate depreciation to domestic inflation, this could entail a substantial depreciation in nominal terms. Given the nature of the adjustment, a floating exchange rate regime appears to be the best option, if supported by appropriate macroeconomic policies. However, given public fixation on a exchange rate stability, a softly managed float would be a better option for Yemen whereby the central bank may have to lead the market toward the equilibrium exchange rate.
    Keywords: Exchange rate policy , Yemen, Republic of , Oil exports ,
    Date: 2007–01–17
  12. By: Selim Elekdag; Nabil Ben Ltaifa; Todd Schneider; Saade Chami
    Abstract: Monetary policy in Yemen is largely rudimentary and ad hoc in nature. The Central Bank of Yemen's (CBY) approach has been based on discretionary targeting of broad money without any clear target to anchor inflation expectations. This paper argues in favor of a new formal monetary policy framework for Yemen emphasizing a proactive and rule-based approach with a greater direct focus on price stability in the context of a flexible management of the exchange rate. Although, as in many developing countries, institutional capacity is a concern, adopting a more formal framework could impel the kind of changes that are required to strengthen the ability of the CBY in achieving low and stable rates of inflation over the medium term.
    Keywords: Monetary policy , Yemen, Republic of , Inflation targeting , Developing countries , Exchange rates , Prices ,
    Date: 2007–01–17

This nep-afr issue is ©2007 by Suzanne McCoskey. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.