nep-afr New Economics Papers
on Africa
Issue of 2010‒12‒11
fourteen papers chosen by
Quentin Wodon
World Bank

  1. Measuring and Comparing Party Ideology in Nonindustrialized Societies: Taking Party Manifesto Research to Africa By Sebastian Elischer
  2. Hunger and Food Insecurity in Nairobi's slums: An assessment using IRT models By FAYE Ousmane; BASCHIERI Angela; FALKINGHAM Jane; MUINDI Kanyiva
  3. The Long-Run Impact of Inflation in South Africa By Kafayat Amusa; Rangan Gupta; Shaakira Karaolia; Beatrice D. Simo Kengne
  4. The Long-Run Relationship between Inflation and Real Stock Prices: Empirical Evidence from South Africa By Riona Arjoon; Mariette Botes; Laban K. Chesang; Rangan Gupta
  5. Structural Breaks and GARCH Models of Stock Return Volatility: The Case of South Africa By Ali Babikir; Rangan Gupta; Chance Mwabutwa; Emmanuel Owusu-Sekyere
  6. Analysing Alternative Policy Response to High Oil Prices, Using an Energy Integrated CGE Microsimulation Approach for South Africa By Albert Touna Mama; Jacques Ewoudou
  7. Does relative income matter for the very poor? - Evidence from rural Ethiopia By Akay, Alpaslan; Martinsson, Peter
  8. Assets, Shocks, and Poverty Traps in Rural Mozambique By Lena Giesbert; Kati Schindler
  9. Kenya's 2007 election crisis By Tsuda, Miwa
  10. Risk-return tradeoff and the behaviour of volatility on the South African stock market: Evidence from both aggregate and disaggregate data By N.Z Mandimika; Z. Chinzara
  11. South African Stock Return Predictability in the Context of Data Mining: The Role of Financial Variables and International Stock Returns By Rangan Gupta; Mampho P. Modise
  12. On the Economics of Regional Powers: Comparing China, India, Brazil, and South Africa By Robert Kappel
  13. Antiretroviral therapy awareness and risky sexual behaviors : evidence from Mozambique By de Walque, Damien; Kazianga, Harounan; Over, Mead
  14. Should prevention campaigns disclose the transmission rate of HIV/AIDS? Theory and evidence from Burundi By Olivier STERCK

  1. By: Sebastian Elischer
    Abstract: Despite a growing interest in African political parties, no comparative analyses of political ideology in Africa have been undertaken to date. This study addresses this shortcoming by applying the Manifesto Research Group’s (MRG) coding scheme to a complete set of African party manifestos in three African countries. The study’s main aim is to determine whether a research tool that has been seminal in the study of Western politics can be used to study political parties in nonindustrialized societies. In a first step the study examines the extent to which African manifestos advance programmatic ideas. Although most parties fail to do so, results indicate drastic differences between parties. The study subsequently investigates how African parties position themselves on a right–left spectrum. Most parties show a bias towards the political Left. Finally, the study examines the stance of individual parties on specific policy issues such as democracy and human rights, education, corruption, youth and women, and intercommunal relations. The study argues that although the MRG scheme has been designed against the historical background of European politics, it can be applied to advance the study of African parties.
    Keywords: social cleavages, political parties, Ghana, Kenya, Namibia
    Date: 2010–06
  2. By: FAYE Ousmane; BASCHIERI Angela; FALKINGHAM Jane; MUINDI Kanyiva
    Keywords: Food insecurity; Hunger; Sub-Saharan Africa; Slum; Nairobi
    Date: 2010–10
  3. By: Kafayat Amusa (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Rangan Gupta (Department of Economics, University of Pretoria); Shaakira Karaolia (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Beatrice D. Simo Kengne (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)
    Abstract: This paper evaluates the hypothesis of long-run super-neutrality of money (LRSN) within the context of the South African economy. The long-run impact of inflation on the interest rate and subsequently, output is estimated by employing a trivariate structural vector autoregression model. The estimation results suggest that the hypothesis of LRSN cannot be rejected, thereby potentially supporting the arguments asserted by Sidrauski (1967).
    Keywords: money neutrality, structural vector autoregression
    JEL: E5 E31
    Date: 2010–12
  4. By: Riona Arjoon (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Mariette Botes (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Laban K. Chesang (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: The existing literature on the theoretical relationship between the rate of inflation and real stock prices in an economy has shown varied predictions about the long run effects of inflation on real stock prices. In this paper, we present some time series evidence on this issue using South African data, by applying the structural bivariate vector autoregressive (VAR) methodology proposed by King and Watson (1997). Our empirical results provide considerable support of the view that, in the long run real stock prices are invariant to permanent changes in the rate of inflation. The impulse responses reveal a positive real stock price response to a permanent inflation shock in the long run, indicating that any deviations in short run real stock prices will be corrected towards the long run value. It is therefore concluded that inflation does not lower the real value of stocks in South Africa, at least in the long run.
    Keywords: Inflation, Real stock prices, Vector autoregressive (VAR) model
    JEL: C32 E31 G12
    Date: 2010–12
  5. By: Ali Babikir (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Rangan Gupta (Department of Economics, University of Pretoria); Chance Mwabutwa (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa); Emmanuel Owusu-Sekyere (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)
    Abstract: This paper investigates the empirical relevance of structural breaks in forecasting stock return volatility using both in-sample and out-of-sample tests and daily returns for the Johannesburg Stock Exchange (JSE) All Share Index from 07/02/1995 to 08/25/2010. We find evidence of structural breaks in the unconditional variance of the stock returns series over the period, with high levels of persistence and variability in the parameter estimates of the GARCH (1, 1) model across the sub-samples defined by the structural breaks. This indicates that structural breaks are empirically relevant to stock return volatility in South Africa. In out-of-sample tests, we find that combining forecasts from different benchmark and competing models that accommodate structural breaks in volatility improves the accuracy of volatility forecasting. Furthermore, for shorter horizons, the MS-GARCH model better captures asymmetry in stock return volatility than the GJR-GARCH (1, 1) model, which better suited to longer horizons, but in general, the asymmetric models fail to outperform the GARCH (1,1) model.
    Keywords: stock return volatility, structural breaks, in-sample tests, out-of-sample tests, GARCH Models
    JEL: C22 C53 G11 G12
    Date: 2010–12
  6. By: Albert Touna Mama; Jacques Ewoudou
    Abstract: Since the seminal work of Jappelli (1990), it has become standard to identify as liquidity-constrained, borrowers who were either turned down for credit or did not apply because they might be turned down. In this paper, we show that the so-called “denied or discouraged” proxy does not capture accurately consumers’ credit access when consumers seek credit to finance expenditure on durable goods. Our sample is drawn from the Panel Study of Income Dynamics. We document systematic misclassification of unconstrained households as constrained. We argue that: for durables, this proxy captures best the intensity put forth by the borrower when shopping for a loan.
    Keywords: Borrowing constraints; Mortgage loans; Consumer search
    JEL: E21 D12
    Date: 2010
  7. By: Akay, Alpaslan (IZA (Institute for the Study of Labor), 53113, Bonn, Germany); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We studied whether relative income has an impact on subjective well-being among extremely poor people. Contrary to the findings in developed countries, we cannot reject the hypothesis that relative income has no impact on subjective well-being in rural areas of northern Ethiopia.<p>
    Keywords: Absolute income; relative income; subjective well-being
    JEL: D10 I31 I32
    Date: 2010–12–02
  8. By: Lena Giesbert; Kati Schindler
    Abstract: Using a micro-level approach to poverty traps, this paper explores welfare dynamics among households in post-war rural Mozambique. Conceptually, the paper builds on an asset-based approach to poverty and tests empirically, with household panel data, for the existence of a poverty trap. Findings indicate that there is little differentiation in productive asset endow-ments over time and that rural households gravitate towards a single equilibrium, which is at a surprisingly low level. The analysis shows that shocks and household coping behavior help to explain the observed poverty dynamics. The single low-level equilibrium points to an overall development trap in the rural farm-based economy. This is attributed to the long-term impact of the civil war, which has consolidated unfavorable economic conditions in ru-ral areas and limited new economic opportunities outside of the agricultural sector.
    Keywords: poverty trap, shocks, asset-based approach, violent conflict, Mozambique
    JEL: D31 I32 O12 O18
    Date: 2010–11
  9. By: Tsuda, Miwa
    Abstract: On 27 December 2007, the Republic of Kenya held its tenth general election since independence. The ballot-related proceedings went as planned up to and including the vote count, providing grounds for optimism for a largely peaceful transfer of power. However, after the official declaration by the Electoral Commission of Kenya late in the afternoon of 30 December that the presidential election had been won by the incumbent, Mwai Kibaki (from Central Province and a Kikuyu), Kenya entered into a period of deep crisis. How might we best understand this great turbulence, which was unprecedented in post-independence Kenya? Perhaps the answer lies in the sudden defeat of the opposition's presidential candidate, Raila Odinga from Nyanza Province and a Luo, who had been widely expected to win. With the post-election upheaval as the context, and looking at the situation from the standpoint of political history, this paper will offer an analysis of trends in Kenya's politics since 2002.
    Keywords: Elections, Internal politics, Ethnic groups, President, Kenya, Election, Conflict, Ethnicity, Democracy, Politics
    Date: 2010–07
  10. By: N.Z Mandimika; Z. Chinzara
    Abstract: The study analyses the nature and behaviour of volatility, the risk-return relationship and the long-term trend of volatility on the South African equity markets, using aggregate-level, industrial-level and sectoral-level daily data for the period 1995-2009. By employing dummy variables for the Asian and the sub-prime financial crises and the 11 September political shock, the study further examines whether the long-term trend of volatility structurally breaks during financial crises and major political shocks. Three time-varying GARCH models were employed: one of them symmetric, and the other two asymmetric. Each of these models was estimated based on three error distributional assumptions. The findings of the study are as follows: Firstly, volatility is largely persistent and asymmetric. Secondly, risk at both the aggregate and disaggregate level is generally not a priced factor on the South African stock market. Thirdly, the TARCH-M model under the Generalised Error Distribution is the most appropriate model for conditional volatility of the South African stock market. Fourthly, volatility generally increases over time and its trend structurally breaks during financial crises and major global shocks. The policy and investment implications of the findings are outlined.
    Keywords: Risk-return tradeoff, stock market volatility, asymmetric GARCH models
    JEL: G10 G11 G12 C52
    Date: 2010
  11. By: Rangan Gupta (Department of Economics, University of Pretoria); Mampho P. Modise (Department of Economics, University of Pretoria and South African Treasury, Pretoria, South Africa)
    Abstract: In this paper, we examine the predictive ability, both in-sample and the out-of-sample, for South African stock returns using a number of financial variables, based on monthly data with an in-sample period covering 1990:01 to 1996:12 and the out-of-sample period of 1997:01 to 2010:04. We use the t-statistic corresponding to the slope coefficient in a predictive regression model for in-sample predictions, while for the out-of-sample, the MSE-F and the ENC-NEW tests statistics with good power properties were utilised. To guard against data mining, a bootstrap procedure was employed for calculating the critical values of both the in-sample and out-of-sample test statistics. Furthermore, we use a procedure that combines general-to-specific model selection with out-of-sample tests of predictive ability to analyse the predictive power of each financial variable. Our results show that, for the in-sample test statistic, only the stock returns for our major trading partners have predictive power at certain short and long run horizons. For the out-ofsample tests, the Treasury bill rate and the term spread together with the stock returns for our major trading partners show predictive power both at short and long run horizons. When accounting for data mining, the maximal out-of-sample test statistics become insignificant from 6-months onward suggesting that the evidence of the out-ofsample predictability at longer horizons is due to data mining. The general-to-specific model shows that valuation ratios contain very useful information that explains the behaviour of stock returns, despite their inability to predict stock return at any horizon.
    Keywords: Stock return predictability, Financial variables, Nested models, In-sample tests, Out-of-sample tests, Data mining, General-to-specific model selection
    JEL: C22 C52 C53 G12 G14
    Date: 2010–12
  12. By: Robert Kappel
    Abstract: As the conception of and debates on regional powers have been led by political science, this pa-per aims to contribute to the discussion from an economics perspective. Based on the discussion of different concepts of economic power—such as those of Schumpeter, Perroux, Predöhl, or Kindleberger—concepts of technological leadership, and the global value chain approaches, the paper develops a research framework for the economics of regional powers. This framework is then tested using descriptive statistics as well as regressions analysis, with a focus on the four regional powers Brazil, China, India, and South Africa. As economic power is relational, the re-lationship of regional powers to other nations in the region is analyzed. According to the findings, only limited statements on the economics of regional powers are possible: a regional power can be described as an economy with a relatively large population and land area which plays a dominant role in trade within the region and in the regional governance. The regional power develops its technological capacities, and its businesses act regionally and globally with increasing strength.
    Keywords: Brazil, China, economic geography, economic leadership, economic power, growth, India, investment, public goods, regional powers, regression analysis, South Africa, technological change, value chain, trade.
    JEL: A12 B1 B29 C01 F14 F15 F23 F59
    Date: 2010–09
  13. By: de Walque, Damien; Kazianga, Harounan; Over, Mead
    Abstract: This paper studies the effect of increased access to antiretroviral therapy on risky sexual behavior, using data collected in Mozambique in 2007 and 2008. The survey sampled both households of randomly selected HIV positive individuals and households from the general population. Controlling for unobserved individual characteristics, the findings support the hypothesis of disinhibition behaviors, whereby risky sexual behaviors increase in response to the perceived changes in risk associated with increased access to antiretroviral therapy. Furthermore, men and women respond differently to the perceived changes in risk. In particular, risky behaviors increase for men who believe, wrongly, that AIDS can be cured, while risky behaviors increase for women who believe, correctly, that antiretroviral therapy can treat AIDS but cannot cure it. The findings suggest that scaling up access to antiretroviral therapy without prevention programs may not be optimal if the objective is to contain the disease, since people would adjust their sexual behavior in response to the perceived changes in risk. Therefore, prevention programs need to include educational messages about antiretroviral therapy, and address the changing beliefs about HIV in the era of increasing antiretroviral therapy availability.
    Keywords: Population Policies,HIV AIDS,Disease Control&Prevention,Gender and Health,Adolescent Health
    Date: 2010–11–01
  14. By: Olivier STERCK (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Among non-specialists, the estimates of the HIV/AIDS transmission rate are generally upwardly biased. This overestimation may be perceived as a godsend, as it increases the incentives to have protected sexual relationships. However, a pernicious effect may counterbalance this positive effect. Combined with the overestimation of the transmission rate, an occasional unprotected sexual encounter may induce the feeling that “the die is cast”, and hence lead to a permanent neglect of condom use. In this paper, I construct a model that reflects such insidious and unexpected behavior. I calculate that the optimal transmission rate to be disclosed for safer sexual practices ranges between 5 % and 24.9 %.
    Keywords: HIV/AIDS, transmission rate, prevention, risk perception, condom, Burundi
    Date: 2010–11–26

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