nep-afr New Economics Papers
on Africa
Issue of 2009‒02‒22
eight papers chosen by
Quentin Wodon
World Bank

  1. Information, Institutions and Banking Sector Development in West Africa By Panicos Demetriades; David Fielding
  2. Savings, Credit and Insurance: Household Demand for Formal Financial Services in Rural Ghana By Mirko Bendig; Lena Giesbert; Susan Steiner
  3. The Impact of AIDS on Income and Human Capital By Ferreira, Pedro Cavalcanti; Santos, Marcelo; Pessoa, Samuel
  4. Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa By Fosu, Augustin Kwasi
  5. A New Socio-Economy in Africa? Thintegration and the Mobile Phone Revolution By Pádraig Carmody
  6. Alternative reconsideration of output growth differrential for the West African Monetary Zone By Balogun, Emmanuel Dele
  7. Inflation persistence and asymmetries: evidence for African countries By Juan Carlos Cuestas; Estefanía Mourelle
  8. The Financial Crisis of 2008 and the Developing Countries By Naude, Wim

  1. By: Panicos Demetriades; David Fielding
    Abstract: Using a new panel dataset for banks in eight West African countries, we explore the factors that exacerbate or alleviate excess liquidity, and the factors that promote or retard the rate of growth of banks’ assets. Loan default rates in the region are high, and variations in the rate impact on liquidity and asset growth. However, the size of this effect is very sensitive to bank age. Some types of improvement in the quality of governance reduce excess liquidity and promote asset growth. However, the impact of other types of improvement, particularly with regard to corruption, is ambiguous. We uncover evidence that provides an explanation for this ambiguity.
    Keywords: Africa; Banking; Default; Institutions; Liquidity
    JEL: G21 O16
    Date: 2009–02
  2. By: Mirko Bendig (GIGA German Institute of Global and Area Studies); Lena Giesbert (GIGA Institute of African Affairs); Susan Steiner (GIGA Institute of Latin American Studies)
    Abstract: This paper argues that the study of the demand for financial services in developing countries leaves out part of the story, if it looks at only one of the three elements of the so called finance trinity, i.e. savings products, loans, or insurances, as is largely done in the literature. In contrast to previous research, it is assumed that households’ choice for any of these services is strongly interconnected. Therefore, the paper simultaneously estimates the determinants of household demand for savings, loans and insurances by applying a multivariate probit model on household survey data from rural Ghana. On the one hand, the estimation results confirm the common finding that poorer households are less likely to participate in the formal financial sector than better off households. On the other hand, there is empirical evidence that the usage of savings products, loans and insurances does not only depend on the socio-economic status of households, but also on various other factors, such as households’ risk assessment and the past exposure to shocks. In addition, trust in the providing institution and its products appear to play a key role.
    Keywords: rural financial markets, financial services, Sub-Saharan Africa, Ghana
    JEL: G20 O16 R22
    Date: 2009–01
  3. By: Ferreira, Pedro Cavalcanti; Santos, Marcelo; Pessoa, Samuel
    Abstract: This paper studies the impact of HIV/AIDS on per capita income and education. It ex- plores two channels from HIV/AIDS to income that have not been sufficiently stressed by the literature: the reduction of the incentives to study due to shorter expected longevity and the reduction of productivity of experienced workers. In the model individuals live for three periods, may get infected in the second period and with some probability die of Aids before reaching the third period of their life. Parents care for the welfare of the future generations so that they will maximize lifetime utility of their dynasty. The simulations predict that the most affected countries in Sub-Saharan Africa will be in the future, on average, thirty percent poorer than they would be without AIDS. Schooling will decline in some cases by forty percent. These gures are dramatically reduced with widespread medical treatment, as it increases the survival probability and productivity of infected individuals.
    Date: 2009–02–12
  4. By: Fosu, Augustin Kwasi
    Abstract: This study explores the extent to which inequality affects the impact of income growth on the rates of poverty changes in sub-Saharan Africa (SSA) comparatively with non-SSA, based on a global sample of 1977?2004 unbalanced panel data. For both regions and all three measures of poverty?headcount, gap, and squared gap?the paper finds the impact of GDP growth on poverty reduction as a decreasing function of initial inequality. The impacts are similar in direction for SSA and non-SSA, so that within both regions there are considerable disparities in the responsiveness of poverty to income growth, depending on inequality. Nevertheless, the income?growth elasticity is substantially less for SSA, implying relatively small poverty-reduction sensitiveness to growth compared with the rest of the developing world. Furthermore, the paper finds a considerable variation in the predicted values of the income?growth elasticity across a large number of SSA countries, implying the need for understanding country-specific inequality attributes for effective poverty-reduction strategies.
    Keywords: inequality, income growth, poverty, sub-Saharan Africa
    Date: 2008
  5. By: Pádraig Carmody
    Abstract: Much has been written about the impacts of information and communication technology (ICT) in Africa and its transformational socio-economic potential. The penetration of mobile phones in particular has been particularly marked in recent years. This paper seeks to interrogate the hypothesis of transformation by examining the ways in which Africa is integrated into global mobile phone value chain, and the uses to which this technology is put on the continent. While mobiles are having significant, and sometimes welfare enhancing impacts, their use is also embedded in existing relations of social support, resource extraction and conflict. Consequently their impacts are dialectical, facilitating change but also reinforcing existing power relations. As Africa is still primarily a user, rather than a producer or creator of ICT, this represents a form of thin integration (“thintegration”) into the global economy, which does not fundamentally alter the continent’s dependent position.
    Date: 2009–02–13
  6. By: Balogun, Emmanuel Dele
    Abstract: This paper examines the determinants of output growth differentials from set convergence criteria in a panel of West African Monetary Zone (WAMZ) states. Drawing largely from micro-founded models, rooted in New Keynesian traditions, the study shows that widespread divergence of output growth rates of participating countries from ideal benchmarks calls to question the ability of independent monetary and exchange rates policy as instruments of national/regional macroeconomic stabilization, the preconditions for unionization. Using a stylized 5-country model of WAMZ area, the differences in national output growth/demand is analyzed in the light of country specific shocks or differences in the monetary transmission mechanisms. The main results show that business cycles (output shocks) stabilization around a desired target was not attained. Over the sample period, the un-weighted average regional GDP growth rates were very slow, vary widely among the countries and responded very poorly to independent monetary policy stance. The strong output growth rates divergence among these countries suggest a reconsideration of output convergence as pre-condition for unionization.
    Keywords: Growth rates differentials; Output convergence; exchange rate; WAMZ members; and panel data
    JEL: E32 C33 F33
    Date: 2009–02–14
  7. By: Juan Carlos Cuestas; Estefanía Mourelle
    Abstract: In this paper we aim at testing the inflation persistence hypothesis as well as modelling (using logistic smooth transition autoregressive, LSTAR, models) the long run behaviour of inflation rates in a pool of African countries. In order to do so, we rely on unit root tests applied to nonlinear models, i.e. Kapetanios et al. (2003). The results point to the non-persistence of inflation hypothesis for most of the countries. In addition, the estimated models are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached and changes between regimes are only achieved after a shock.
    Keywords: Inflation, Persistence, Unit Roots, Nonlinearities.
    JEL: C32 E31 F15
    Date: 2009–02
  8. By: Naude, Wim
    Abstract: Following the financial crisis that broke in the US and other Western economies in late 2008, there is now serious concern about its impact on the developing countries. The world media almost daily reports scenarios of gloom and doom, with many predicting a deep global recession. This paper critically discusses this and concludes that as far as the developing countries are concerned, a bit more optimism may be warranted. Although without doubt there are particular countries that will be adversely affected, there will also be countries that may be less affected, may avoid recession, and may recover sooner than expected. Six major reasons for this conclusion are discussed. Without this resilience in the developing world, prospects for the world?s richer countries would be much bleaker. Finally, some options available to the developing countries for minimizing the impact of the crisis are discussed. The crisis accentuates the urgent need for accelerating financial development in developing countries, both through domestic financial deepening, domestic resource mobilization, and reform of the international financial system.
    Keywords: financial crisis, developing countries, development finance, financial development
    Date: 2009

This nep-afr issue is ©2009 by Quentin Wodon. 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.