nep-afr New Economics Papers
on Africa
Issue of 2009‒08‒08
six papers chosen by
Quentin Wodon
World Bank

  2. Southern African Economic Integration: Evidence from an Augmented Gravity Model By Warin, Thierry; Wunnava, Phanindra V.; Tengia, Optat; Wandschneider, Kirsten
  3. Improving the Quality of Womenâs Gold in Mali, West Africa: The Case of Shea By Perakis, Sonja Melissa
  4. Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing By Admasu Shiferaw
  5. Fonction de reaction de la banque centrale et credibilite de la politique monétaire: Cas de la BEAC By KAMGNA, Severin Yves; NGUENANG, Christian; TALABONG, Hervé; OULD, Isselmou
  6. Propositions d'indicateurs macroprudentiels pour le systeme bancaire de la CEMAC By KAMGNA, Severin Yves; TINANG, Nzesseu Jules; TSOMBOU, Kinfak Christian

  1. By: Paresh Narayan; Seema Narayan; Russell Smyth
    Abstract: This paper examines the relationship between democracy and economic growth in 30 Sub-Saharan African countries. As our proxy for democracy we first use the democracy index constructed by Freedom House and then check the sensitivity of our findings using, as an alternative proxy for democracy, the Legislative Index of Electoral Competitiveness (LIEC). We find support for the Lipset hypothesis - in the long run, real GDP Granger causes democracy and an increase in GDP results in an improvement in democracy – in Botswana and Niger with both datasets, for Chad with the Freedom House data only and for Cote d’Ivoire and Gabon with the LIEC data only. Support for the compatibility hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a positive effect on real income - is found for Botswana with the Freedom House data and for Madagascar, Rwanda, South Africa and Swaziland with the LIEC data. Support for the conflict hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a negative effect on real income - is found for Gabon with the Freedom House data and Sierra Leone with the LIEC data.
    Keywords: Causality, Democracy, Economic Growth, Sub-Saharan Africa.
    JEL: O1 O4
    Date: 2009–08
  2. By: Warin, Thierry (Middlebury College); Wunnava, Phanindra V. (Middlebury College); Tengia, Optat (Brown University); Wandschneider, Kirsten (Occidental College)
    Abstract: This paper investigates the feasibility of creating a common-currency union consisting of 16 countries in Southern Africa. We estimate an augmented-gravity model that includes public deficit, public debt, public expenditure, inflation, and the foreign reserves position. We also integrate Africa-specific variables such as existing economic blocs in the region, colonial heritage, and the convergence of living standards. Our analysis shows that the prospect for further integration in Southern Africa is promising, but many challenges still persist. The existing economic blocs can provide a first stepping stone to a larger currency union, but countries continuously have to cultivate good governance and fiscal discipline.
    Keywords: optimum currency area, gravity model, Southern African integration, endogenous optimum currency area theory
    JEL: F1 F3 F4 O24 O55
    Date: 2009–07
  3. By: Perakis, Sonja Melissa
    Abstract: The collection, primary processing, and subsequent sale of shea-based products make an important contribution to rural womenâs cash income in many of Maliâs shea producing areas. Internationally, shea has recently become popular in high-valued cosmetics thanks to its therapeutic propertiesâ a deviation away from its historic use as a cheap cocoa-butter substitute. For these reasons, international development actors have targeted the Malian shea value chain as part of their private-sector-development and rural-poverty-alleviation programs and strategies. Information asymmetry in the production and marketing of shea has led to a âMarket for Lemonsâ scenario much like that described by Akerlof (1970), thereby compromising the subsectorâs potential to serve as a powerful source of rural income growth and poverty alleviation. A combination of tools is used to describe the Malian shea value chain, including the âStructure, Conduct, Performanceâ framework borrowed from the industrial organization literature and the âSubsector Studiesâ approach popular in current export-led international development strategies. Analogies from subsectors historically plagued by adverse selection and moral hazard are used to identify potential leverage points and intervention strategies for stakeholders to help improve shea quality and returns to primary producers. The analysis suggests the Malian government has the potential to play an important role in this process as a coordinating body and channel captain, with donors and private enterprises playing complementary roles.
    Keywords: Information asymmetry, karité, Mali, rural development, shea, womenâs income, Agribusiness, Institutional and Behavioral Economics, International Development, Marketing, Q13, Q23, L15, L24, 013, O17,
    Date: 2009
  4. By: Admasu Shiferaw
    Abstract: This paper investigates the investment behavior of firms under uncertainty. Its main focus is the heterogeneity of firm level investment responses to both demand and supply side sources of uncertainty. Accordingly, the investment-uncertainty relationship is examined across groups of firms with varying degrees of investment irreversibility defined on the basis of market structures and access to secondary markets for capital goods. Consistent with theories of irreversible investment, we find evidence that uncertainty undermines the investment responses of firms in less competitive markets and in industries with little or no secondary markets for capital goods. In comparison with small firms, investment by large firms is more responsive to changes in demand and more in-line with models of partial irreversibility.
    Keywords: Investment, Uncertainty, Irreversibility, African Manufacturing, Ethiopia
    JEL: D21 D81 O16
    Date: 2009–04–01
  5. By: KAMGNA, Severin Yves; NGUENANG, Christian; TALABONG, Hervé; OULD, Isselmou
    Abstract: In this paper, using monetary policy rules, we build a model which describes the fixing of the interest rate by the Bank of Central African's States (BEAC). First, with a GMM adapted for a forward looking rule, we propose a reaction function for this central bank. The result shows that from 1986 to 2006, the formulation of the monetary policy strongly depends on the past interest rate. The rule describes well the interest rate fixation process by the BEAC which tends to be guide mainly by price stability than growth objectives. Secondly, we estimate a simple rule using an error correction model. In this case, the results were better but confirm those issued by the GMM method.
    Keywords: Taylor rules; Bank; Central Bank; Fonction de reaction; Banque centrale; CEMAC; BEAC; GMM; Monetary policy rules;
    JEL: E58 E52 E63 G28 C33 E61 G21
    Date: 2009–07
  6. By: KAMGNA, Severin Yves; TINANG, Nzesseu Jules; TSOMBOU, Kinfak Christian
    Abstract: The main purpose of this paper is to determine the macro-prudential indicators of financial strength that can be used under supervision of the banking system in CEMAC. More specifically, we start from a set of indicators listed in the literature on macro-prudential supervision, and identify those that are relevant to the announcement of a deterioration of the banking system in the subregion. We sought these indicators among the variables of micro-aggregated banking sector, macroeconomic variables and the combination of these two sets. At the end of this study, it appears that the claims on the private sector, foreign direct investment and the combination of exports and credits to the private sector, increase the risk of degradation of the banking system, while this risk is reduced by the exchange rate, the capital of the banking system and inflation. This set of indicators should therefore attract the attention of the regulator to allow a quick solve of any potential banking crisis in CEMAC.
    Keywords: Système Bancaire; Indicateurs Macro-Prudentiels; Fragilité; Dégradation; CEMAC; Cameroun; Congo; Guinée Equatoriale; Tchad; Banque
    JEL: C13 E58 C12 G38 G28 E47 G21
    Date: 2009–07

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