nep-afr New Economics Papers
on Africa
Issue of 2007‒12‒08
twelve papers chosen by
Suzanne McCoskey
George Washington University

  1. what is missing between agricultural growth and infrastructure development ? cases of coffee and dairy in Africa By Smith, James Wilson; Iimi, Atsushi
  2. Monetary Policy Rules For Manging Aid Surges In Africa By Christopher Adam; Stephen O’Connell; Edward Buffie
  3. The comparability of the Statistics South Africa October Household Surveys and Labour Force Surveys By Derek Yu
  4. Impact of Infrastructure Spending in Mali: A CGE modeling approach By Antonio Estache; Jean-François Perrault; Luc Savard
  5. Retail Market Prices of Fonio Reveal The Demand For Quality Characteristics in Bamako, Mali By Dury, S.; Meuriot, V.; Fliedel, G.; Blancher, S.; Bore Guindo, F.; Drame, D.; Bricas, N.; Diakite, L.; Cruz, J.F.
  6. Woodford goes to Africa By Kang Yong Tan; David Vines
  7. Perceptions of environmental risks in Mozambique : implications for the success of adaptation and coping strategies By Schroter, Dagmar; Patt , Anthony G.
  8. Cote d ' ivoire volatility, shocks and growth By Noer, John; Espina, Carlos; Bogetic, Zeljko
  9. Empirical evidence on the new international aid architecture By Stijn Claessens; Danny Cassimon
  10. The youth and the employment situation in Togo. By Mawudeku, Koffi
  11. Cote d ' Ivoire : from success to failure a story of growth, specialization, and the terms of trade By Espina, Carlos; Noer, John; Bogetic, Zeljko
  12. Cote d ' Ivoire : competitiveness, Cocoa, and the real exchange rate By Noer, John; Espina, Carlos; Bogetic, Zeljko

  1. By: Smith, James Wilson; Iimi, Atsushi
    Abstract: Although it is commonly believed that aggregate economic growth must be associated with public infrastructure stocks, the possible infrastructure needs and effects are different from industry to industry. The agriculture sector is typical. Various infrastructures would affect agriculture growth differently depending on the type of commodity. This paper finds that a general transport network is essential to promote coffee and cocoa production, perhaps along with irrigation facilities, depending on local rainfall. Conversely, along with the transport network, the dairy industry necessitates rural water supply services as well. In some African countries, a 1 percent improvement in these key aspects of infrastructure could raise GDP by about 0.1-0.4 percent, and by possibly by several percent in some cases.
    Keywords: Transport Economics Policy & Planning,Economic Theory & Research,Crops & Crop Management Systems,Food & Beverage Industry,Rural Development Knowledge & Information Systems
    Date: 2007–11–01
  2. By: Christopher Adam (University of Oxford); Stephen O’Connell (Swarthmore College); Edward Buffie (Indiana University; International Monetary Fund)
    Abstract: We examine the properties of alternative monetary policy rules in response to large aid surges in low-income countries characterized by incomplete capital market integration and currency substitution. Using a dynamic stochastic general equilibrium model, we show that simple monetary rules that stabilize the path of expected future seigniorage for a given aid flow have attractive properties relative to a range of conventional alternatives including those involving heavy reliance on bond sterilization or a commitment to a pure exchange rate float. These simple rules, which are shown to be robust across a range of fiscal responses to aid inflows, appear to be consistent with actual responses to recent aid surges in a range of post-stabilization countries in Sub-Saharan Africa.
    Keywords: Basle Committee, capital adequacy, financial governance, financial architecture, financial reform, international standards, capital flows, poor countries, cost of capital, international development
    Date: 2007–02
  3. By: Derek Yu (Department of Economics, Stellenbosch University)
    Abstract: Statistics South Africa (Stats SA) has been collecting labour market data with household surveys and in a fairly comparable format since 1993. These datasets have been studied and compared extensively in order to better understand the workings of the South African labour market. Many of these studies compare household surveys of different periods in order to identify trends, but the validity of such trends is conditional on the comparability of the different datasets. Besides, the naïve comparisons of the different datasets have been questioned. Other problems include inconsistencies in questionnaire design, coding errors, changes in the sampling frame, the oversampling of agricultural workers in OHS1995, the oversampling of subsistence agricultural workers in LFS2000a and LFS2000b, as well as the oversampling of informal workers in LFS2001a. Most of these issues have received attention in papers by Burger and Yu (2006), Casale, Muller and Posel (2005), and Wittenberg (2004). By drawing attention to a few of the lesser known problems, this paper aims to build on the existing literature by further stimulating debate around the strengths and weaknesses of the existing survey data, as well as considering the best ways in which to analyse the existing data. The inconsistencies that occur in the data independently of the way in which questions are asked by the interview, as well as the inconsistencies that result from the way in which the survey questions are formulated or placed in a given sequence are discussed. Where possible, adjustments that may contribute towards increased consistency in the responses are suggested. Ultimately, it is hoped that the lessons learnt from such discussions will serve to inform questionnaire design in future.
    Keywords: South Africa, Household Survey, Labour Market Trends, Earnings
    JEL: J00
    Date: 2007
  4. By: Antonio Estache (World Bank and, the European Centre for Advanced Research in Economics and Statistics at the Free University of Brussels); Jean-François Perrault (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in Mali. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analyst raise concern on financing these infrastructures after construction and that external funding of these can create major distortion and have a negative impact on the trade balance of these countries. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that foreign aid does produce Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed. Moreover, growth effects contribute to attenuate the negative effects.
    Keywords: Investment externalities, foreign aid, exchange rate, fiscal reforms
    JEL: C68 E62 F35 H54
    Date: 2007
  5. By: Dury, S.; Meuriot, V.; Fliedel, G.; Blancher, S.; Bore Guindo, F.; Drame, D.; Bricas, N.; Diakite, L.; Cruz, J.F.
    Abstract: African consumers' expectations concerning the quality of food products are great. In spite of constrained budgets, we showed that market retail prices revealed quality preferences of the consumers and not just production costs. In very poor countries like Mali, food innovation is limited by the very low purchasing power of the population. However, technological food product or process innovations are possible and sometimes valuable. Demand driven innovation may lead to open new markets, opportunities for small and medium scale enterprises and to improve consumers' welfare. Based on this assumption, technical research was done to provide new food products. In this paper, we used both sensory tests and a hedonic price approach, to estimate the consumers' demand for different characteristics of fonio, a West African cereal, and showed that poor consumers have quality requirements and pay for them. We showed that the shadow price or hedonic price paid for quality characteristics is small but significant. A comparison between sensory tests and a market study showed a convergence between what people say they prefer and what they really pay for. Results were consistent and showed directions for technological improvement of the product and its production process. The partial least square method was used to estimate hedonic prices of the different modalities of fonio quality traits. This method was interesting since it solved the ordinary least square method's colinearity problems. ...French Abstract : Les attentes des consommateurs africains concernant la qualité de l'alimentation sont importantes malgré des budgets très contraints. Nous montrons ici que les prix de marchés révèlent des préférences qualitatives et non seulement des coûts de production. Dans des pays très pauvres comme le Mali, l'innovation technologique est limitée par le très faible pouvoir d'achat de la population. Cependant les innovations technologiques sont possibles et parfois payantes. L'innovation en réponse à une demande peut permettre d'ouvrir de nouveaux marchés, de donner des opportunités aux petites et moyennes entreprises et d'améliorer le bien-être des consommateurs. Sur la base de cette hypothèse, la recherche technologique s'applique à fournir de nouveaux produits. Dans cet article, en utilisant à la fois des tests de dégustation et une analyse des prix hédoniques, nous estimons la demande des consommateurs pour différentes caractéristiques du fonio, une céréale d'Afrique de l'Ouest. Nous montrons que des consommateurs pauvres ont des exigences de qualité et paient de fait pour les satisfaire. Nous montrons que les prix hédoniques ou shadow prices payés pour les caractéristiques qualitatives sont faibles mais significatifs. La comparaison des tests sensoriels et de l'étude de marché montre une convergence entre ce que les gens disent et ce pour quoi ils paient réellement. Les résultats sont cohérents et montrent des directions pour l'amélioration technologique des produits et des procédés de transformation. La méthode des moindres carrés ordinaires a été utilisée pour l'estimation des prix hédoniques des différentes modalités des attributs de qualité du fonio. Cette méthode est intéressante car elle résout les problèmes de colinéarité.
    JEL: D12 L15 O33 Q11
    Date: 2007
  6. By: Kang Yong Tan (University of Oxford); David Vines (University of Oxford)
    Abstract: This paper analyses the effects of inflation shocks, demands shocks, and aid shocks on low-income, quasi-emerging-market economies, and discusses how monetary policy can be used to manage these effects. We make use of a model developed for such economies by Adam et al. (2007). We examine the e¤ects of four things which this model features, which we take to be typical of such economies. These are: the existence of a tradeables/non-tradeables production structure, the fact that international capital movements are - at least initially - confined to the effects of currency substitution by domestic residents, the use of targets for financial assets in the implementation of monetary policy, and the pursuit, in some countries, of a fixed exchange rate. We then modify the model to examine the effect on such economies of three major changes, changes which we take to be part of the transition by such economies towards more fully- fledged emerging-market status: an opening of the capital account so that uncovered- interest-parity comes to hold, a move to floating exchange rates, and the replacement of fixed stocks of financial aggregates by the pursuit of a Taylor rule in the conduct of monetary policy.
    Keywords: currency substitution, emerging market macroeconomics, interactions between fiscal and monetary policy, Taylor rule
    JEL: E5 E61 O11
    Date: 2007–07
  7. By: Schroter, Dagmar; Patt , Anthony G.
    Abstract: Policies to promote adaptation climate risks often rely on the willing cooperation of the intended beneficiaries. If these beneficiaries disagree with policy makers and programme managers about the need for adaptation, or the effectiveness of the measures they are being asked to undertake, then implementation of the policies will fail. A case study of a resettlement programme in Mozambique shows this to be the case. Farmers and policy-maker disagreed about the seriousness of climate risks, and the potential negative consequences of proposed adaptive measures. A project to provide more information about climate change to farmers did not change their beliefs. The results highlight the need for active dialog across stakeholder groups, as a necessary condition for formulating policies that can then be successfully implemented.
    Keywords: Hazard Risk Management,Environmental Economics & Policies,Climate Change,Population Policies,Rural Poverty Reduction
    Date: 2007–11–01
  8. By: Noer, John; Espina, Carlos; Bogetic, Zeljko
    Abstract: Key economic variables in Cote d ' Ivoire vary widely from their long-run trends, moving in multi-year cyclical patterns. Cocoa prices move with cycles in growth rates, capital stock, real exchange rates, terms of trade, cocoa production, and coffee production and output. These patterns have become more pronounced since the 1970s as volatility increased. This paper characterize these cycles, estimates the cocoa price-quantity relationship, and analyzes co-movements due to shocks generate a forecast. Three key conclusions follow. First, the economy of Cote d ' Ivoire has experienced two fundamental transitions, one in 1976 related to cocoa, and another in 1994 related to exchange rates. From 1960 to 1976, world cocoa prices grew steadily, and then fell in real terms. The country ' s growth showed a similar pattern. An econometric model indic ates that the relationship between cocoa price and quantity experienced a break in 1976 and provides evidence of Cote d ' Ivoire ' s significant influence on world cocoa prices. Second, cocoa price shocks affect growth rates and trade indicators, and are important sources of volatility in the Cote d ' Ivoire. The terms of trade and real exchange rate are also sources of volatility for growth and productivity. Third, a forecast of per-worker output based on these variables predicts continued declines in GDP per worker in Cote d ' Ivoire for the near future. This dismal forecast implies the need for a radical and rapid improvement on political, security, and economic management to reverse the two and a half decades of economic decline.
    Keywords: Emerging Markets,Markets and Market Access,Economic Theory & Research,Crops & Crop Management Systems,Access to Markets
    Date: 2007–11–01
  9. By: Stijn Claessens (Universiteit van Amsterdam); Danny Cassimon (University of Antwerp)
    Abstract: We conduct an empirical study on how 22 donors allocate their bilateral aid among 147 recipient countries over the 1970-2004 period to investigate whether recent changes in the international aid architecture at the international and country levelhave led to changes in donor behavior. We find that after the fall of the Berlin Wall and especially in the late nineties, bilateral aid responds more to economic needs and the quality of a country’s policy and institutional environment and less to debt, size and colonial and political linkages. We also find more selectivity by donors when a country uses a PRSP and passes the HIPC decision point. Importantly, PRSPs and HIPCs reduce the perverse effects of large bilateral and multilateral debt shares on aid flows, suggesting less defensive lending. Overall, it appears certain international aid architecture changes have led to more selectivity in aid allocations. The specific factors causing these changes remain unclear, however. And since there remain (large) differences among donors in selectivity that appear to relate to donors’ own institutional environments, reforms will have to be multifaceted.
    Keywords: development aid, aid allocation, selectivity, debt relief, HIPC, PRSP, aid architecture
    JEL: O11 O16 O19
    Date: 2007–06
  10. By: Mawudeku, Koffi
    Abstract: Since 1993, when Togo got into the democracy process, the economic and the social conditions were affected by the political crisis that emerged from the lack of democracy and respect of human rights by the Togolese authorities. The young people unemployment is one of the major problems that the country is facing. They seem left to themselves. Most of them who are University graduates have to ride Taxi Motorcycles Called “ZEMIDJAN” (in the local language) to survive. What are the causes of the problem? And how can they be tackled? These are few questions we shall try to answer in this small article.
    Keywords: Imanitogo
    JEL: O55
    Date: 2007
  11. By: Espina, Carlos; Noer, John; Bogetic, Zeljko
    Abstract: Real GDP per capita and capital stock in Cote d ' Ivoire grew strongly from 1960 to 1979, but have declined ever since, for twenty-five years. As a result, the country has traveled a full circle from economic success to failure in little more than a generation. What are the long-term factors behind this dismal growth story? Are the Ivorian development problems mostly of recent origin? Or there are more fundamental, economic factors that explain its long term performance? Four principal conclusions are as follows: First, Cote d ' Ivoire ' s long-term growth performance is not fully explained by temporary factors (e.g., CFA overvaluation or recent conflict). Longer term factors such as capital accumulation, productivity, and terms of trade are key to understanding the country ' s performance as is the policy of specialization in a single commodity--cocoa. Second, the long-term decline in per capita output started well before the currency overvaluation, and at a time of political stability, and is related to a major, secular deterioration in terms of trade that started after 1976. Third, total factor productivity estimates indicate that TFP per capita also grew until it hit a plateau in 1976-78, and then shrank thereafter, despite gains in human capital accumulation. Fourth, Cote d ' Ivoire has pursued a policy of specialization in cocoa beans but this bet on a single commodity has ultimately failed. The strategy that brought prosperity during the 1970s resulted in a growth failu re when cocoa prices began declining since 1976.
    Keywords: Economic Theory & Research,Economic Growth,Emerging Markets,,Access to Finance
    Date: 2007–11–01
  12. By: Noer, John; Espina, Carlos; Bogetic, Zeljko
    Abstract: This paper explores competitiveness of Cote d ' Ivoire ' s economy over a long period of 1960-2003 and its link with cocoa prices. The main conclusions are as follows. First, using four measures of real effective exchange rate (REER) for the 1960-2002 period, we track the evolution of REER and conclude, inter alia, that until 2003, REER remained well below its 1994 level. Second, we find that based on our measure of the multilateral REER with dynamic weights, which covers most recorded trade, France no longer dominates Cote d ' Ivoire ' s trade. Instead, Cote d ' Ivoire has diversified its set of trading partners. Unfortunately, it has also specialized in one export product, raw cocoa. This paper aims to contribute to the question to what extent do cocoa prices affect Cote d ' Ivoire ' s competitiveness in world trade? Third, the answer to this question is that cocoa prices are an important determinant of Cote d ' Ivoire ' s competitiveness. Similar to the case of a classic " Dutch Disease, " increases in the real world price of a " natural resource " (i.e., cocoa) tend to result in the appreciation of the CFA franc and a loss in competitiveness. Econometric tests further confirm that 1994 was a " break-point " not only for growth and productivity (as documented in the two related papers) but also for trade competitiveness. Recent productivity per worker trends versus wages also seem to indicate slow growth in 1996-2000, without major improvement in competitiveness.
    Keywords: Economic Theory & Research,Currencies and Exchange Rates,Emerging Markets,Markets and Market Access,Macroeconomic Management
    Date: 2007–11–01

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.
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