nep-afr New Economics Papers
on Africa
Issue of 2012‒04‒17
ten papers chosen by
Quentin Wodon
World Bank

  1. Reducing illegal immigration to South Africa: A dynamic CGE analysis By Heinrich R. Bohlmann
  2. Oil and Agriculture in the Post-Separation Sudan By Siddig, Khalid H.A.
  3. Management Practices, Self-Selection into Management Training Participation, and Training Effects in the Garment Industry in Ethiopia By Girum Abebe; Tetsushi Sonobe
  4. Macroeconomic Surprises and Stock Returns in South Africa By Rangan Gupta; Monique Reid
  5. Financial Development and Remittances in Africa and the Americas: A Panel Unit-Root Tests and Panel Cointegration Analysis. By Bichaka Fayissa; Christian Nsiah
  6. Climate (change) and conflict: resolving a puzzle of association and causation By Christian Almer; Stefan Boes
  7. Exchange rate variation and fiscal balance in Nigeria: a time series analysis By SANGOSANYA, Awoyemi O.; ATANDA, AKINWANDE A,
  8. A Recipe for Success? Randomized Free Distribution of Improved Cooking Stoves in Senegal By Gunther Bensch; Jörg Peters
  9. Design and Implementation of a Common Currency Area in the East African Community By Thomas Kigabo RUSUHUZWA; Paul Robert MASSON
  10. Infrastructures institutionnelles et développement financier en zone CEMAC By Mpabe Bodjongo, Mathieu Juliot

  1. By: Heinrich R. Bohlmann (Department of Economics, University of Pretoria)
    Abstract: South African authorities are attempting to limit inflows of illegal immigrants. Evidence for the United States presented in Dixon et al (2011) suggests that a policy-induced reduction in labour supply from illegal immigrants generates a welfare loss for legal residents. I use a similar labour market mechanism within a dynamic CGE model for South Africa, but take into consideration a number of well-known facts about the local economy. With high unemployment rates among low skilled workers and a legal minimum wage in place, I find a net gain in employment and welfare for legal residents in South Africa when reducing the inflow of illegal immigrants.
    Keywords: Illegal immigration, dynamic CGE modelling
    JEL: J61 C68
    Date: 2012–04
  2. By: Siddig, Khalid H.A.
    Abstract: The Comprehensive Peace Agreement (CPA), which was signed by the government of Sudan and the Sudanese People’s Liberation Movement (SPLM) ended more than 20 years of civil war. According to the CPA, the Sudan’s government has 50% of the oil exploited from the wells existing in the south in addition to the oil produced from the northern wells. The latter represents about 30% of the total oil production in Sudan. In January 2011, the people in southern Sudan have voted for separation from the Sudan and in July 2011 the Republic of South Sudan was officially announced as Africa’s newest state. Now the CPA period is over and the south possesses its entire production of oil, but need to use the export infrastructure that exists in the north to export it. For that the south need to pay fees and customs for which the exact amounts need to be further negotiated. Sudan would lose a huge part of its revenue from oil, which constituted a growing share in its trade, government revenue and GDP during the last decade. This paper tries to investigate the consequences of separation on the Sudan’s economy. A regional general equilibrium model with Africa database of the Global Trade Analysis Project (GTAP) is applied. Results show that the entire economy would be hit when a 20% cut in oil output is simulated. The study introduces the non-oil exports of the agricultural sector as an alternative to oil and recommends enhancing the efficiency in agriculture and promoting agricultural exports to gradually bring the economy back on track.
    Keywords: oil, agriculture, Sudan, South Sudan, separation, CGE modelling, Agricultural and Food Policy, Crop Production/Industries, Food Security and Poverty, International Relations/Trade, Labor and Human Capital, Land Economics/Use, Production Economics, Productivity Analysis, C6, D5, D6, F1, F2, H5, N5,
    Date: 2012–04
  3. By: Girum Abebe (Ethiopian Development Research Institute, Ethiopia); Tetsushi Sonobe (National Graduate Institute for Policy Studies)
    Abstract: Many observational studies of micro and small enterprises have found that enterprise performance and education levels of entrepreneurs are positively associated. Does it follow that entrepreneurs’ management capacities depend on their academic achievements? This paper examines what types of entrepreneurs participated in a managerial training program held in Ethiopia, who benefited more from the program, and who had better management knowledge before the program. We find that highly educated entrepreneurs were more willing to learn about management, more knowledgeable about management, and gaining more from the training program, but that such simple relationships are missing among entrepreneurs operating larger enterprises.
    Keywords: Africa, Ethiopia, education, management practices, management training
    Date: 2012–03
  4. By: Rangan Gupta (Department of Economics, University of Pretoria); Monique Reid (Department of Economics, Stellenbosch University)
    Abstract: The objective of this paper is to explore the sensitivity of industry-specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry-specific South African stock market indices and evaluates the sensitivity of these indices to a various unanticipated macroeconomic shocks. We begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian Vector Autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing us to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR. The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.
    Keywords: Bayesian Vector Autoregressive Model, Event Study, Macroeconomic Surprises, Stock Returns
    JEL: C22 C32 E31 E44 G1
    Date: 2012–04
  5. By: Bichaka Fayissa; Christian Nsiah
    Abstract: In view of the sizable increase in recorded migrant workers’ remittances to developing countries from $70 billion in 2000 to $167 in 2005, this study investigates the long-run relationship between remittances and financial services development (FSD) and control variables including exchange rate (ERS), the size of migrant stock (MSK), the domestic per capita income (DPC) in the receiving country and foreign per capita income (FPC) in the main host country. We use a newly developed panel fully modified OLS (PFMOLS) on annual panel data over the 1985-2007 period for 44 countries consisting of 25 from Africa and 19 from the Americas. It is found that financial development, exchange rate stability, and the size of migrant stock have positive and statistically significant effect on remittances in both regions and in each of the regions. The study has important policy implications for the role of the financial services development through domestic credit expansion by the banking industry as well as increased competition among money transfer operations and exchange rate stability in order to promote the continuation of remittance inflows as a major source of economic growth in Africa and the Americas. The study also shows that there are regional differences in the impact and magnitude of the determinants of remittances.
    Keywords: Workers’ Remittances, Transaction Cost Factors, Per Capita income, Unit-Root tests, Error Correction Model, PFMOOLS, Panel Data, Africa and the Americas
    JEL: E21 F21 G22 J61 O16
    Date: 2012–03
  6. By: Christian Almer; Stefan Boes
    Abstract: There is an ongoing discussion especially among political scientists and economists whether and how climate variability affects civil conflicts and wars in developing countries. Given the predicted climatic changes, several studies argue that increasing temperatures or decreasing precipitation will lead to more conflicts in the future. This paper aims at linking the different strands of the literature by analyzing the causal mechanisms at work. We use short-term weather variability as well as long-term changes in Sub-Saharan Africa and find that climate (change) significantly affects agricultural output, to some extent also GDP, and has no robust direct effects on civil wars. Negative shocks in GDP, however, have the expected fostering effects on civil conflicts.
    Keywords: Civil conflict; climate change; economic shocks; Africa
    JEL: D74 Q54 C36 N47
    Date: 2012–04
    Abstract: Exchange rate remains one of the principal determinants of a nation’s external balance and fiscal status of most emerging economies. How better its fluctuation is managed has a long way to go with the performance of major macroeconomic variables in a country. It is behind this backdrop that this paper tries to examine the effects of exchange rate fluctuation on fiscal deficit crisis in Nigeria between 1980 and 2008. The period is so chosen as it covers the range of time that witnessed the greatest fluctuation’s in the external value of the nation’s legal tender (naira). The regression analysis reveals that exchange rate has impacted negatively on fiscal deficit over the period under consideration. The Augmented Dickey-Fuller (ADF) unit root test reveals that all the time series variables employed are non-stationary at levels; both the intercept and deterministic trend. Appropriate policies are therefore recommended on how best to reposition the economy in the face of continuing devaluation of naira.
    Keywords: Exchange rate; Fiscal deficit; Macroeconomic variables
    JEL: E31 C22 F31 B41
    Date: 2012–04–10
  8. By: Gunther Bensch; Jörg Peters
    Abstract: Today more than 2.7 billion people rely on biomass as their primary cooking fuel, with profound implications for the environment and people’s well-being. Wood provision is often time-consuming and the emitted smoke has severe health effects – both burdens that afflict women in particular. The dissemination of Improved Cooking Stoves (ICS) is frequently considered an eff ective remedy for these problems. This paper evaluates the take-up of ICS and their impacts through a randomized controlled trial in rural Senegal. Although distributed for free, the ICS are used by almost 100 % of households. Furthermore, we find substantial effects on firewood consumption, eye infections, and respiratory disease symptoms. These findings substantiate the increasing efforts of the international community to improve access to improved cooking stoves and call for a more direct promotion of these stoves.
    Keywords: Impact evaluation; randomized controlled trial; respiratory disease symptoms; energy access
    JEL: C93 D12 O13 Q41
    Date: 2012–03
  9. By: Thomas Kigabo RUSUHUZWA; Paul Robert MASSON
    Abstract: The East African Community (EAC) has fast-tracked its plans to create a single currency for the five countries making up the region, and hopes to conclude negotiations on a monetary union protocol by the end of 2012. While the benefits of lower transactions costs from a common currency may be significant, countries will also lose the ability to use monetary policy to respond to different shocks. Evidence presented shows that the countries differ in a number of respects, facing asymmetric shocks and different production structures. Countries have had difficulty meeting convergence criteria, most seriously as concerns fiscal deficits. Preparation for monetary union will require effective institutions for macroeconomic surveillance and enforcing fiscal discipline, and euro zone experience indicates that these institutions will be difficult to design and take a considerable time to become effective. This suggests that a timetable for monetary union in the EAC should allow for a substantial initial period of institution building. In order to have some visible evidence of the commitment to monetary union, in the meantime the EAC may want to consider introducing a common basket currency in the form of notes and coin, to circulate in parallel with national currencies.
    Keywords: EAC monetary union, fiscal surveillance, optimum currency areas, parallel currencies, regional integration
    JEL: E42 E58 E61 F33 F55
    Date: 2012–04–04
  10. By: Mpabe Bodjongo, Mathieu Juliot
    Abstract: This dissertation proposes to evaluate the impact of institutional development on the financial development in the Central Africa Economic and Monetary Community (CAEMC).An econometric and statistical approach is used in order to realise this objective. According to the methodology suggested by Demirguc-Kunt & Levine (1996) and by Chouchane Verdier (2004), the statistical approach makes it possible to build the financial development indice of the countries of the mentioned zone. This statistical approach reveals the delay by these countries in term of financial development compared to other countries. Following the methodology proposed by Demetriades & Luintel (1996)and by Ito (2005), the econometric approach, with the aid of sargan test and the Arrelano & Bond (1991)test on our dynamic panel data, highlights the negative impact of the weakness of the level of institutional development on the financial development.It can explain why financial liberalization is only slightly beneficial with the financial development.
    Keywords: Libéralisation financière ; développement financier ; développement institutionnel ; CEMAC ; données de panels dynamiques
    JEL: E0 P51 N2 G0 C33
    Date: 2012

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