nep-afr New Economics Papers
on Africa
Issue of 2008‒03‒01
nineteen papers chosen by
Suzanne McCoskey
George Washington University

  1. Oil Wealth and Economic Growth in Oil Exporting African Countries By Olomola Philip Akanni
  2. Financial Liberalisation and the Effectiveness of Monetary Policy on House Prices in South Africa By Kasai Ndahiriwe; Rangan Gupta
  3. The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different? By Charles Amo Yartey
  4. Transactional Sex as a Response to Risk in Western Keny By Robinson, Jonathan; Yeh, Ethan
  5. Knowledge-based productivity in low-tech industries: evidence from firms in developing countries. By Goedhuys, Micheline; Janz, Norbert; Mohnen, Pierre
  6. The Impact of Remittances on Economic Growth and Development in Africa. By Bichaka Fayissa; Christian Nsiah
  7. A Modelling of Ghana's Inflation Experience: 1960–2003 By Mathew Kofi Ocran
  8. Sources of Technical Efficiency among Smallholder Maize Farmers in Southern Malawi By Ephraim W. Chirwa
  9. Implications of Oil Inflows for Savings and Reserve Management in the CEMAC By Paulo Flavio Nacif Drummond
  10. Relative Price Variability and Inflation: Evidence from the Agricultural Sector in Nigeria By Obasi O. Ukoha
  11. Local Currency Debt Markets in the West African Economic and Monetary Union By Amadou N. R. Sy
  12. Exchange Market Pressure in African Lusophone Countries By Macedo, Jorge Braga de; Pereira, Luis Brites; Reis, Afonso Mendonça
  13. The effectiveness of policies to control a human influenza pandemic : a literature review By Dutta, Arin
  14. Trade Restrictiveness in the CEMAC Region. The Case of Congo By Maria-Angels Oliva
  15. The Impact of Access to Credit on the Adoption of Tobacco in Malawi By Simtowe, Franklin
  16. Achieving accelerated and shared growth in Ghana : a MAMS-based analysis of costs and opportunities By Medvedev, Denis; Bussolo, Maurizio; Bogetic, Zeljko
  17. Evaluating Alternative Approaches to Poverty Alleviation: Rice Tariffs versus Targeted Transfers in Madagascar By David Coady; Paul A. Dorosh; Bart Minten
  18. Where Did All the Aid Go? An Empirical Analysis of Absorption and Spending By Shekhar Aiyar; Ummul Ruthbah
  19. Optimal Taxation in the Forestry Sector in the Congo Basin: The Case of Gabon By Oscar E. Melhado

  1. By: Olomola Philip Akanni
    Abstract: This study analyses the effect of oil rents on economic growth in oil exporting African countries. It also attempts to provide both theoretical and empirical analysis of the channels of transmission of resource curse of natural resources on growth in these countries. It adopts a panel data regression analysis for the period 1970 to 2000 for 47 oil exporting countries including Africa, and 13 non-oil exporting countries. The major findings are that there was evidence of resource curse in oil exporting countries, including oil exporting African countries, exchange rate and the Dutch disease syndrome do not explain the resource curse in these countries, including Africa, the absence of democracy in oil exporting countries hinders economic growth, and the despicable state of institutions in oil exporting countries encourage grabbing of public resources and oil rents through rent seeking hence retarding economic growth. The basic conclusion from this study is that for oil exporting African countries, as for other oil exporting countries, oil rents have failed to promote growth.
    Date: 2007–09
  2. By: Kasai Ndahiriwe (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper investigates the effectiveness of monetary policy on house prices in South Africa, before and after financial liberalisation, with financial liberalisation being identified with the recommendations of the De Kock Commission (1985). Using both impulse response and variance decomposition analysis performed on SVARs, we find that, irrespective of house sizes, during the period of financial liberalisation, interest rate shocks had relatively stronger effects on house price inflation. However, given that the size of these effects were nearly negligible, the result seems to indicate that house prices are exogenous, and, at least, are not driven by monetary policy shocks.
    Keywords: Financial liberalisation, Impulse Response, Variance Decomposition, Structural Decomposition.
    JEL: C01 C32 E52
    Date: 2008–03
  3. By: Charles Amo Yartey
    Abstract: This paper examines the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004. The paper finds that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows, and stock market liquidity are important determinants of stock market development in emerging market countries. The results also show that political risk, law and order, and bureaucratic quality are important determinants of stock market development because they enhance the viability of external finance. This result suggests that the resolution of political risk can be an important factor in the development of emerging stock markets. The analysis also shows the factors identified above as determining stock market development in emerging economies can also explain the development of the stock market in South Africa.
    Keywords: Emerging markets , South Africa , Stock markets , Income , Investment , Savings , Banking sector ,
    Date: 2008–02–04
  4. By: Robinson, Jonathan; Yeh, Ethan
    Abstract: Formal and informal commercial sex work is a way of life for many poor women in developing countries. Though sex workers have long been identified as crucial in affecting the spread of HIV/AIDS, particularly in sub-Saharan Africa, the nature of sex-for-money transactions remains poorly understood. Using a unique panel dataset constructed from 192 self-reported sex worker diaries which include detailed information on sexual behavior, labor supply, and income shocks, we find that sex workers adjust their supply of risky, better compensated sex to cope with unexpected income shocks, exposing themselves to increased risk of HIV infection. In particular, women are 3.2% more likely to see a client, 21.7% more likely to have anal sex, and 20.6% more likely to have unprotected sex on days in which a household member falls ill. Women also increase their supply of risky sex on days after missing work due to STI symptoms. Given that HIV prevalence has been estimated at 9.8% in this part of Kenya, these behavioral responses entail significant health risks for sex workers and their partners, and suggests that sex workers are unable to cope with income risk through other formal or informal consumption smoothing mechanisms.
    JEL: O12
    Date: 2008–02–26
  5. By: Goedhuys, Micheline (UNU-MERIT and University of Antwerpen); Janz, Norbert (UNU-MERIT and Aachen University of Applied Sciences); Mohnen, Pierre (UNU-MERIT and University of Maastricht)
    Abstract: Using firm level data from five countries - Brazil, Ecuador, South Africa, Tanzania and Bangladesh - this paper examines the knowledge-based determinants of productivity of firms active in food processing, textiles, and garments and leather products. In particular, it seeks to investigate the importance of various sources of knowledge in explaining productivity in the different industries. The knowledge sources driving productivity performance are very different across sectors. In food processing, firm productivity is most strongly affected by quality of management and foreign ownership linkages. In textiles, firms raise productivity levels by importing new machinery and through research and development. In garments and leather products, R&D and design activities, high quality management and licensing technology from foreign firms are significant productivity determinants. Firms' productivity levels are further depressed by regulatory and financial constraints.
    Keywords: Productivity, Knowledge, R&D, Developing Countries, Food Processing, Textiles, Garments, Leather
    JEL: D24 L66 L67 O14 O31
    Date: 2008
  6. By: Bichaka Fayissa; Christian Nsiah
    Abstract: For more than half a century, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to capital investment and technological change, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas and research and development. The positive or negative impacts of the above listed traditional sources of economic growth have been well documented in literature. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the direct or indirect relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using an unbalanced panel data spanning from1980 to 2004 for 37 African countries. We find that remittances boost growth in countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
    Keywords: Workers’ Remittances, Economic Growth, Panel Data, Fixed-Effects, Random-Effects,Arellano-Bond, Quantile Regression
    JEL: E21 F21 G22 J61 O16
    Date: 2008–02
  7. By: Mathew Kofi Ocran
    Abstract: The study sought to ascertain the key determinants of inflation in Ghana for the past 40 years. Stylized facts about Ghana’s inflation experience indicate that since the country’s exit from the West African Currency Board soon after independence, inflation management has been ineffective despite two decades of vigorous reforms. Using the Johansen cointegration test and an error correction model, the paper identified inflation inertia, changes in money and changes in Government of Ghana treasury bill rates, as well as changes in the exchange rate, as determinants of inflation in the short run. Of these, inflation inertia is the dominant determinant of inflation in Ghana. It is therefore suggested that to make treasury bill rates more effective as a nominal anchor, inflationary expectations ought to be reduced considerably.
    Date: 2007–08
  8. By: Ephraim W. Chirwa
    Abstract: The agricultural sector in Malawi is vital to the economy for incomes and food security. The sector accounts for 35% of national income, generates 90% of foreign exchange, and provides paid and self-employment to 92% of the rural population. One constraint in achieving food security has been the small size and fragmented nature of land holdings among a large proportion of households in Malawi. Nonetheless, since independence there have been several attempts by the government to improve the productivity of food crops on small farms, particularly for maize, including the development of high yielding maize varieties, subsidization of farm inputs, provision of credit facilities, and the liberalization of both farm produce prices and farm produce marketing. While there have been several studies on food production in Malawi, the focus has mainly been on technology development and adoption, production constraints, the impact of structural adjustment policies, and the impact of price and marketing liberalization. This paper estimates technical efficiency among smallholder maize farmers in Malawi and identifies sources of inefficiency using plot-level data. We find that smallholder maize farmers in Malawi are inefficient; the average efficiency score is 46.23% and 79% of the plots have efficiency scores below 70%. The results of the study reveal that inefficiency declines on plots planted with hybrid seeds and for those controlled by farmers who belong to households with membership in a farmers club or association.
    Date: 2007–11
  9. By: Paulo Flavio Nacif Drummond
    Abstract: This paper argues that as part of their fiscal optimization strategies CEMAC countries should be given the opportunity to invest into longer-term assets that generate market-based returns. The BEAC has created a framework of longer-term savings funds but due to low remuneration and other factors usage has remained limited. The paper also argues that regional savings in the form of reserve accumulation must be sufficient to ensure the stability of the common currency. While the current level of common foreign reserves may now be appropriate, maintaining an adequate level calls for a link between country-specific savings decisions and the setting of a regional reserve target. Strengthening and diversifying reserve management will also be desirable, a process the BEAC has embarked upon.
    Keywords: Working Paper , Central African Economic and Monetary Community , Oil revenues , Fiscal policy , Reserves adequacy , Reserves accumulation , Savings , Central bank policy ,
    Date: 2007–10–24
  10. By: Obasi O. Ukoha
    Abstract: The main objective of this study is to establish quantitative relationships among the relative price volatility of agricultural commodities, inflation and agricultural polices in Nigeria. The data for the study, covering the period 1970–2003, were obtained from publications of the Central Bank of Nigeria, Federal Office of Statistics, and Federal Ministry of Agriculture and Rural Development. Our results show that the effect of inflation on relative price variability among agricultural commodities in Nigeria is non-neutral. Inflation has a significant positive impact on relative price variability in both the long run and the short run. The findings suggest the need for policies that will buffer the agricultural sector from the effects of inflation in the short run, and in addition the crops subsector from the long-run effect of inflation. Similarly, policies that reduce the rate of inflation will minimize relative price variability among agricultural commodities and consequently reduce inefficiency, distortions and misallocation of resources in agriculture that might be caused by inflation. No data points in the study period showed negative inflation. As a result of this, the data could not provide evidence for the effect of deflation on relative price variability. Policies like the Green Revolution and structural adjustment programmes and post-SAP policies increased relative price variability among cash crops in the long run, but influenced food crop prices only in the short run. In addition to this, the Operation Feed the Nation project (OFN) had a significant positive short-run effect on food prices. Thus the agricultural policies under SAP, post-SAP and Green Revolution caused price changes that led to efficient reallocation of resources among cash crops in the long run and food crops in the short run. The policies should be considered in planning for the agricultural sector. On the other hand, the price control policy brought about a reduction in relative price variability among cash crops and consequently led to a misallocation of resources in the sector. Cash crop prices should be allowed to be determined by market forces of demand and supply, and no attempts should be made to fix prices administratively.
    Date: 2007–10
  11. By: Amadou N. R. Sy
    Abstract: The paper reviews trends and developments in the rapidly growing local currency debt markets in the WAEMU. The main findings are that common institutions, such as a regional central bank and securities exchange have led to high cross-border transactions within the union. However, excess liquidity in the regional banking system has led to limited credit differentiation among issuers and a reliance on supply and demand conditions as a key determinant of yields. The paper also discusses a number of policy issues, including debt management, that are likely to emerge as the markets for government securities continue to develop.
    Keywords: West African Economic and Monetary Union , Debt , Bonds , Debt management , Excess liquidity ,
    Date: 2007–11–08
  12. By: Macedo, Jorge Braga de; Pereira, Luis Brites; Reis, Afonso Mendonça
    Abstract: This paper explores the credibility of exchange rate arrangements for the five African Portuguese-speaking (PALOP) countries. Our working hypothesis is that credibility necessarily implies low mean exchange market pressure (EMP), low EMP conditional volatility and low-severity EMP crises. In addition, economic fundamentals must account for EMP dynamics. We also seek evidence of a risk-return relationship for mean EMP and of “bad news” (negative shocks) having a greater impact on EMP volatility than “good news” (positive shocks). Using our econometric models, we are able to rank PALOP countries’ conditional volatility in ordinal terms. Our main conclusion is that countries with currency pegs, such as Guinea-Bissau (GB) and Cape Verde (CV), clearly have lower volatility when compared to those with managed floats and are therefore more credible. Moreover, EMP crises episodes under pegs are much less severe. We find that economic fundamentals correctly account for mean EMP in all countries and that the risk-return relationship is much more favourable for investors under currency pegs, as the increase in volatility is lower for the same rate of return. The exception to this finding is Mozambique (MOZ), which apparently has a risk-return profile akin to that enjoyed by countries with pegs. A plausible reason is that MOZ has the only managed float in our sample implementing monetary and exchange rate policy within the confines of an IMF framework, which establishes floors for international reserves and ceilings for the central bank’s net domestic assets. This intuition needs to be tested, however. EMP conditional volatility is generally driven by changes in domestic credit (lowers it) and foreign reserve changes (raises it). The first effect is more pronounced under currency pegs, but also under MOZ’s managed float. “Bad news” increases volatility more that “good news” only in the case of CV’s currency peg, which we take to be another sign of its credibility. A few striking cross-country comparisons also emerge in our analysis. Among countries with managed floats, we find that Angola (ANG) has the most severe EMP crises whilst MOZ has the least severe. São Tomé & Princípe (STP), meanwhile, lies between these two extremes but its EMP crises behaviour is clearly much closer to that of MOZ. STP’s credibility may also be improving since its volatility has declined as of 2002 and its level is now much closer to that of MOZ, whose managed float has lowest volatility of such arrangements.
    Date: 2008
  13. By: Dutta, Arin
    Abstract: The studies reviewed in this paper indicate that with adequate preparedness planning and execution it is possible to contain pandemic influenza outbreaks where they occur, for viral strains of moderate infectiousness. For viral strains of higher infectiousness, containment may be difficult, but it may be possible to mitigate the effects of the spread of pandemic influenza within a country and/or internationally with a combination of policies suited to the origins and nature of the initial outbreak. These results indicate the likelihood of containment success in ' frontline risk ' countries, given specific resource availability and level of infectiousness; as well as mitigation success in ' secondary ' risk countries, given the assumption of inevitable international transmission through air travel networks. However, from the analysis of the m odeling results on interventions in the U.S. and U.K. after a global pandemic starts, there is a basis for arguing that the emphasis in the secondary risk countries could shift from mitigation towards containment. This follows since a mitigation-focused strategy in such developed countries presupposes that initial outbreak containment in these countries will necessarily fail. This is paradoxical if containment success at similar infectiousness of the virus is likely in developing countries with lower public health resources, based on results using similar modeling methodologies. Such a shift in emphasis could have major implications for global risk management for diseases of international concern such as pandemic influenza or a SARS-like disease.
    Keywords: Avian Flu,Disease Control & Prevention,Health Monitoring & Evaluation,Population Policies,HIV AIDS
    Date: 2008–02–01
  14. By: Maria-Angels Oliva
    Abstract: Congo's vital dependence on trade for development stands in contradiction with its trade policy. As a member of the CEMAC, Congo's tariff scheme at least formally is guided by CEMAC's 1994 trade regime agreement. This paper shows CEMAC's customs code is restrictive relative to that of comparable regional integration groups. The paper also discusses a number of quantitative and qualitative barriers to trade applied by Congo that render its current regime complex, nontransparent, and relatively unpredictable, compromising efforts to develop the non-oil sector and the country's export base. Moreover, Congo's high tariffs and other taxes have not led to higher fiscal revenues, as the number of exemptions granted in recent years has surged and customs administration remains weak.
    Keywords: Trade restrictions , Congo, Republic of , Revenues , Trade policy ,
    Date: 2008–01–30
  15. By: Simtowe, Franklin
    Abstract: This paper investigates the impact of access to credit on the adoption of burley tobacco among households that differ in their credit constraint status using a Double hurdle model. The data used in the study is from Malawi collected by the International Food Policy Research Institute (IFPRI) in collaboration with the Rural Development Department of Bunda College of Agriculture. Results reveal that while access to credit increases adoption among credit constrained households, it has a limited effect among unconstrained households. Results further show that access to credit does not lead to an immediate increase in the likelihood of adoption for tobacco, but conditional on adoption it enables credit constrained households to allocate more land to tobacco production. Consistent with theory, results for the test for separation of consumption and production decisions indicate that household demographic factors affect demand for labor among credit constrained households while they have no effect among unconstrained households.
    Keywords: credit constraints; double-hurdle; tobacco; adoption; Malawi
    JEL: D0 O3
    Date: 2008–01–30
  16. By: Medvedev, Denis; Bussolo, Maurizio; Bogetic, Zeljko
    Abstract: This paper relies on the recently developed Maquette for Millennium Development Goals Simulations (MAMS) model to assess the consistency of alternative scaling-up and policy packages for growth and achievement of the Millennium Development Goals in Ghana. In the baseline scenario, Ghana ' s strong near and medium-term growth outlook puts it in a good posit ion to achieve the poverty Millennium Development Goal ahead of schedule, but other goals are likely to remain elusive before 2015. In the accelerated growth scenario-which addresses the major gaps in water and sanitation and other infrastructure-even more rapid growth and poverty reduction are possible, but important targets in the areas of education, health, and environment remain unattainable. Although growth is complementary to achievement of the Millennium Development Goals, the authors also find important growth-human development trade-offs in the near term. The estimates show that the resource requirements for achieving the key Millennium Development Goals by 2015 are large, reaching US$82 per capita in an illustrative foreign-grant financed scenario. Increased intake and retention of students contribute to rising scarcity of unskilled labor, buttressing unskilled wages, while high demand for skills from the sectors related to the Millennium Development Goals raises the returns to human capital. These developments lead to improvements in the welfare of the poorest members of Ghanaian society and contribute to a small reduction in overall inequality.
    Keywords: Population Policies,Achieving Shared Growth,,Public Sector Expenditure Analysis & Management,Economic Theory & Research
    Date: 2008–02–01
  17. By: David Coady; Paul A. Dorosh; Bart Minten
    Abstract: This paper uses a partial equilibrium framework to evaluate the relative efficiency, distributional and revenue implications of rice tariffs and targeted transfers in Madagascar, especially in the context of identifying their respective roles for poverty alleviation. Although there are likely to be substantial efficiency gains from tariff reductions, these accrue mainly to higher income households. In addition, poor net rice sellers will lose from lower tariffs. Developing a system of well designed and implemented targeted direct transfers to poor households is thus likely to be a substantially more costeffective approach to poverty alleviation. Such an approach should be financed by switching revenue raising from rice tariffs to more efficient tax instruments. These policy conclusions are likely to be robust to the incorporation of general equilibrium considerations.
    Keywords: Poverty , Madagascar , Tariffs , Rice , Revenues ,
    Date: 2008–01–24
  18. By: Shekhar Aiyar; Ummul Ruthbah
    Abstract: This paper examines the macroeconomic usage of aid using panel data for a broad sample of aid-recipients. By definition an increase in aid must go toward a reduction in the current account balance (absorbed aid), an increase in capital outflows, or reserve accumulation. It is found that short-run absorption is typically very low, with much aid exiting through the capital account. Moreover, aid spending, defined in terms of the increase in government fiscal expenditures as a result of aid, is significantly greater than aid absorption, implying that aid systematically leads to an injection of domestic liquidity in recipient economies. The evidence here may help illuminate the rather weak link between aid and growth found in the literature. It reinforces the case for greater coordination between fiscal and monetary authorities in response to aid inflows.
    Keywords: Development assistance , Government expenditures , Consumption , Investment , Current account balances ,
    Date: 2008–02–06
  19. By: Oscar E. Melhado
    Abstract: This paper reviews forestry reform in the Congo basin, focusing on Gabon. It argues that the key challenge for the Congo basin countries is to manage their forests in a sustainable manner. It presents the current situation of forestry taxation and forestry reform in Gabon. The paper analyzes optimal taxation in the forestry sector using a static model. The model works from the proposition that tax policy should be used exclusively for revenue purposes and resource preservation should be achieved mainly through legislation and enforcement. It argues that when prices are uncertain the best practice is to tax only profits.
    Keywords: Forestry , Gabon , Taxation , Economic models ,
    Date: 2007–11–05

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