nep-afr New Economics Papers
on Africa
Issue of 2013‒12‒20
fifteen papers chosen by
Quentin Wodon
World Bank

  1. Farmer Demand for Soil Fertility Management Practices in Kenya’s Grain Basket By Kamau, Mercy; Smale, Melinda; Mutua, Mercy
  2. Drivers of Growth: Evidence from Sub-Saharan African Countries By Manuk Ghazanchyan; Janet Gale Stotsky
  3. Ethiopia: A socio-economic study By Mohajan, Haradhan
  4. Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment By Asongu Simplice
  5. Fighting African corruption when existing corruption-control levels matter in a dynamic cultural setting By Asongu , Simplice A
  6. How do institutions matter in the income-equalizing effect of mobile phone penetration? By Asongu, Simplice A
  7. The Paradigm of African Agricultural Efficiency, 1967-2012: What Does Meta-Analysis Reveal? By Ogundari, Kolawole
  8. Is Information Power? Using Mobile Phones and Free Newspapers during an Election in Mozambique By Jenny Aker, Paul Collier, Pedro C. Vicente
  9. REER Imbalances and Macroeconomic Adjustments in the Proposed West African Monetary Union By Asongu Simplice
  10. Challenges of Smallholder Soybean Production and Commercialization in Eastern Province of Zambia. By Lubungu, Mary; Burke, William; Sitko, Nicholas J.
  11. On the Impact of Microcredit: Evidence from a Randomized Intervention in Rural Ethiopia By Jaikishan Desai; Kristin Johnson; Alessandro Tarozzi
  12. Sustainability of the Malawian Current Account Deficit: Application of Structural and Solvency Approaches By Nkuna, Onelie
  13. Money Targeting in a Modern Forecasting and Policy Analysis System: an Application to Kenya By Michal Andrle; Andrew Berg; Enrico Berkes; Rafael A Portillo; Jan Vlcek; R. Armando Morales
  14. Risky business : political instability and greenfield foreign direct investment in the Arab world By Burger, Martijn; Ianchovichina, Elena; Rijkers, Bob
  15. The Investment-Financing-Growth Nexus: The Case of Liberia By Will Clark; Manuel Rosales

  1. By: Kamau, Mercy; Smale, Melinda; Mutua, Mercy
    Abstract: Land degradation cripples smallholder crop production in Sub-Saharan Africa, including those found in the densely populated, grain basket areas of Kenya. Research in the early nineties already documented and rated nutrient depletion to be very high in the east African Highlands. Whereas some of the soil related problems are inherent, smallholder farmer practices have contributed to the degradation, including the increasing soil nutrient depletion.
    Keywords: Agricultural and Food Policy, International Development, Research and Development/Tech Change/Emerging Technologies,
    Date: 2013–11
  2. By: Manuk Ghazanchyan; Janet Gale Stotsky
    Abstract: This study examines the drivers of growth in Sub-Saharan African countries, using aggregate data, from the past decade. We correlate recent growth experience to key determinants of growth, including private and public investment, government consumption, the exchange regime and real exchange rate, and current account liberalization, using various econometric methodologies, including fixed and random effects models, with cluster-robust standard errors. We find that, depending on the specification, higher private and public investments boost growth. Some evidence is found that government consumption exerts a drag on growth and that more flexible exchange regimes are beneficial to growth. The real exchange rate and liberalization variables are not significant.
    Keywords: Economic growth;Sub-Saharan Africa;Private investment;Public investment;Foreign exchange;Exchange rate regimes;Real effective exchange rates;Sub-Saharan Africa, growth, exchange rate regimes, real exchange rate
    Date: 2013–11–22
  3. By: Mohajan, Haradhan
    Abstract: Ethiopia is considered to be one of the oldest nations in the world but at present its socio-economic condition is not satisfactory. It is the second most populous country in Sub-Saharan Africa. It is rated the poorest and most heavily indebted countries of the world, ranked last out of 208 countries. About 26% of the populations of the country, mostly women and rural residents, are living with their income less than one dollar a day. In terms of health and welfare, it ranks among Africa’s and the world’s poorest nations and the infant mortality rate is among the highest in the world. Political instability is another major problem of Ethiopia for the socio-economic development. In this paper an attempt has been taken to discuss socio-economic circumstances of Ethiopia.
    Keywords: Child marriage, food aid, food price inflation, political instability, poverty and food security.
    JEL: O5
    Date: 2013–08–03
  4. By: Asongu Simplice (Yaoundé/Cameroun)
    Abstract: This paper investigates how financial, trade, institutional and political liberalization policies have affected financial sector competition in Africa using updated data to appraise second generation reforms. The ‘freedom to trade’ and ‘economic freedom’ indices are employed. Hitherto, unexplored financial sector concepts of formalization, semi-formalization, informalization and non-formalization are also introduced. The following findings are established. Firstly, relative to money supply: (1) with the exception of the economic freedom mechanism, liberalization policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (2) apart from the foreign direct investment and economic freedom channels, liberalization policies have been fruitful for semi-formal financial development at the cost of other financial sectors and; (3) with the exception of economic freedom, both the informal and non-formal sectors have developed owing to liberalization to the detriment of the formal financial sector. Secondly, relative to GDP, the semi-formal, informal and/or non-formal financial sectors have also generally improved as a result of liberalization. Policy implications are discussed.
    Keywords: Welfare; Banking; Liberalization; Shadow economy; Africa
    JEL: D60 E50 F30 O17 O55
    Date: 2013–09
  5. By: Asongu , Simplice A
    Abstract: Purpose – This paper assesses the determinants of corruption-control with freedom dynamics (economic, political, press and trade), government quality and a plethora of socio-economic factors in 46 African countries using updated data. Design/methodology/approach – A quantile regression approach is employed while controlling for the unobserved heterogeneity. Principal component analysis is also used to reduce the dimensions of highly correlated variables. Findings – With the legal origin fundamental characteristic, the following findings have been established. (1) While political freedom increases corruption-control (CC) in a bottom quantile of English common law countries, there is no such evidence in their French civil law counterparts. (2) Government quality consistently improves CC across all quantiles in English common law countries but fails to exert the same effect in middle quantiles of French civil law countries. (3) Economic freedom ameliorates CC only in common law countries with low existing CC levels (bottom quantiles). (4) We find no significant evidence of a positive ‘press freedom’-CC nexus and having the status of Low income English common law (French civil law) countries decreases (increases) CC. From a religious domination scenario, we also find the following. (1) Political and trade freedoms only reduce CC in Christian dominated countries while press freedom has a mitigation effect in both religious cultures (though more consistent across quantiles of Christian-oriented countries). (2) Government quality is more pro-CC in Christian than in Muslim-dominated countries. (3) While economic freedom has a scanty negative nexus with CC in Christian-oriented countries, the effect is positive in their Muslim-dominated counterparts. (4) Having a low-income status in countries with Christian common law tradition improves CC. Originality/value – We complement the literature on the fight against corruption in Africa by employing recently documented additional factors that should be considered in corruption studies.
    Keywords: Corruption; Freedom; Government quality; Quantile regression; Africa
    JEL: C10 H10 K10 O10 O55
    Date: 2013–09
  6. By: Asongu, Simplice A
    Abstract: The object of this paper is to complement theoretical ‘mobile penetration’ literature with empirical evidence in a dual manner: on the one hand, assess the income-redistributive effect of mobile phone penetration and; on the other hand, the instrumentality of good governance in this nexus. Main findings suggest an equalizing income-redistributive effect, with a higher magnitude in the presence of government quality instruments. It follows that, good governance is a necessary condition for a higher income-equalizing effect of mobile phone penetration. The empirical evidence which deviates from mainstream country-specific and microeconomic survey-based approaches is on 52 African countries. ‘Mobile phone’-oriented poverty reduction channels are also discussed.
    Keywords: Mobile Phones; Shadow Economy; Poverty; Inequality; Africa
    JEL: E00 G20 I30 L96 O33
    Date: 2013–09
  7. By: Ogundari, Kolawole
    Abstract: The present study investigates the development (i.e., rise or decline) in African agricultural efficiency level and what drives the efficiency over the years. A total of 379 frontier studies resulting in 534 farm level efficiency estimates were considered using meta-regression analysis (MRA) for the empirical analysis. The results show that mean efficiency estimates from the selected case studies decrease significantly as year of survey in the primary study increases. Apparently, this implies that over the years, negative efficiency change characterized the growth of African agriculture and food production. The effect of other study attributes considered in the MRA show that studies published in Journals, with parametric and primal technology specification produced significantly higher efficiency estimates, while those published in top ranking journals and with Cobb-Douglass and Translog functional forms produced significantly lower efficiency estimates. Other results show that education, followed by experience; extension and credit are the major drivers of agricultural efficiency levels in Africa over the years. Given these findings; we suggest policies that encourage investment in human capital development associated with education and extension should be prioritized to enhance the growth of agriculture and food production in the region.
    Keywords: Agriculture, efficiency, meta-analysis, growth, fractional regression, Africa, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Demand and Price Analysis, Environmental Economics and Policy, Land Economics/Use, Productivity Analysis, C13, Q12, Q18,
    Date: 2013–08
  8. By: Jenny Aker, Paul Collier, Pedro C. Vicente
    Abstract: Incumbent politicians in African countries have been cementing their positions in recent elections. That was the case of the Mozambican election of 2009, where the ruling party secured 75 percent of the vote, amid low participation and clear challenges of political accountability. We conducted a field experiment implemented nationwide based on three interventions providing information to voters and calling for their participation in the elections: an SMS civic education campaign centered on the elections, an SMS hotline to which citizens were able to report electoral misconduct, and the distribution of a free newspaper door-to-door focusing on voter education. We measure the effects of these treatments by looking at official electoral results, a behavioral measure of political participation, reports by electoral observers, and surveys. We find a clear positive effect of all treatments on voter turnout, close to five percentage points. Some treatments benefitted incumbents. We also have evidence that the distribution of the free newspaper led to more accountability-based participation and to a decrease in the incidence of electoral problems. All treatments increased information but caused diverse effects on perceptions about politics.
    Keywords: voter education, political economy, cell phones, newspapers, randomized experiment, field experiment, Mozambique, Africa
    JEL: D72 O55 P16
    Date: 2013–06
  9. By: Asongu Simplice (Yaoundé/Cameroun)
    Abstract: With the spectre of the Euro crisis hunting embryonic monetary unions, we use a dynamic model of a small open economy to analyze REERs imbalances and examine whether the movements in the aggregate real exchange rates are consistent with the underlying macroeconomic fundamentals in the proposed West African Monetary Union (WAMU). Using both country-oriented and WAMU panel-based specifications, we show that the long-run behavior of the REERs can be explained by fluctuations in the terms of trade, productivity, investment, debt and openness. While there is still significant evidence of cross-country differences in the relationship between underlying macroeconomic fundamentals and corresponding REERs, the embryonic WAMU has a stable error correction mechanism with four of the five cointegration relations having signs that are consistent with the predictions from economic theory. Policy implications are discussed and the conclusions of the analysis are a valuable contribution to the scholarly and policy debate over whether the creation of a sustainable monetary union should precede convergence in macroeconomic fundamentals that determine REER adjustments.
    Keywords: Exchange rate; Macroeconomic impact; Proposed WAMU
    JEL: F31 F33 F42 O55
    Date: 2013–09
  10. By: Lubungu, Mary; Burke, William; Sitko, Nicholas J.
    Abstract: This study uses data from qualitative research and different national representative surveys to identify factors limiting smallholder linkages to the growing markets for soybean in Zambia and to provide concrete strategies to overcome them. Soybean production remains low despite its clear benefits for smallholders. This is due to limited availability of high yielding soybean seed and limited incentive for private investment in smallholder soybean seed multiplication. Low production is also related to agronomic practices, such as late planting and poor disease management as well as low usage of yield improving inputs such as inoculum.
    Keywords: Agribusiness, Agricultural and Food Policy,
    Date: 2013–11
  11. By: Jaikishan Desai; Kristin Johnson; Alessandro Tarozzi
    Abstract: We use data from a randomized controlled trial conducted in 2003-2006 in rural Amhara and Oromiya (Ethiopia) to study the impacts of the introduction of micro finance in treated communities. We document that borrowing increased substantially in locations where the programs started their operations, but we find mixed evidence of improvements in a number of socio-economic outcomes, including income from agriculture, animal husbandry, non-farm self-employment, schooling and indicators of women's empowerment.
    Keywords: microcredit, cluster randomized controlled trial, Ethiopia
    JEL: O12 O16
    Date: 2013–10
  12. By: Nkuna, Onelie
    Abstract: The objective of the paper is to examine the sustainability of the current account in Malawi. The study employs both econometric analyses and solvency approaches to complement each other. Results from both approaches confirm that Malawi’s current account deficits were excessive and unsustainable during the period of 1980 to 2010. Results from the econometric analysis reveal that for Malawi’s current account to move towards a sustainable path, particular attention should be paid to the following factors; external debt, terms of trade, openness, real exchange rate, net foreign assets and growth. Furthermore, the current account deficit was excessively above the norm, deviating by an average of 5.0 percent during the study period. The solvency approach to current account sustainability, further confirms that the country was running an unsustainable current account deficit. Interestingly, even after the Highly Indebted Poor Countries (HIPC) relief, the current account was still unsustainable. In this regard, policies should ensure that the real exchange rates is not overvalued, growth is enhanced particularly in the export sector and also ensuring that external debt is sustainable will be key to ensuring sustainable current account.
    Keywords: Current Account deficit; External Sustainability; Malawi
    JEL: F32
    Date: 2013–08
  13. By: Michal Andrle; Andrew Berg; Enrico Berkes; Rafael A Portillo; Jan Vlcek; R. Armando Morales
    Abstract: We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.
    Keywords: Monetary policy;Kenya;Interest rates;Inflation targeting;Monetary aggregates;Demand for money;Low-income developing countries;Economic models;Monetary Policy, Money Targeting, Forecasting, Kenya, Low-Income Countries
    Date: 2013–11–25
  14. By: Burger, Martijn; Ianchovichina, Elena; Rijkers, Bob
    Abstract: Which foreign direct investments are most affected by political instability? Analysis of quarterly greenfield investment flows into countries in the Middle East and North Africa from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non-resource tradable sectors. By contrast, investments in natural resource sectors and non-tradable activities appear insensitive to such shocks. Consistent with these patterns, the significant reduction in investment inflows in Arab Spring affected economies was starkest in the non-resource manufacturing sector. Political instability is thus associated with increased reliance on non-tradables and aggravated resource dependence. Conversely, how intensified political instability affects aggregate foreign direct investment is critically contingent on the initial sector composition of these flows.
    Keywords: E-Business,Debt Markets,Emerging Markets,Investment and Investment Climate,Energy Production and Transportation
    Date: 2013–12–01
  15. By: Will Clark; Manuel Rosales
    Abstract: Liberia is facing large infrastructure gaps and developmental needs that constrain the country’s growth potential. The government has set an ambitious agenda to transform the economy and to reach middle-income country status by 2030 by scaling up investment in infrastructure and human capital. Fiscal space remains constrained by rigidities in current spending and the government will need to resort to borrowing to close some of the gaps. This paper presents an estimate of the nexus between public investment, financing, and growth in Liberia using an inter-temporal macroeconomic model. The model has been calibrated as much as possible to Liberian economic data and assumes that public investment has a high economic and social rate of return and is highly complementary toward private sector investment. The objective of the paper is to contribute to the debate on how fast public investment should be scaled up to address the country’s developmental needs. The paper also highlights the trade-offs and potential risks associated with different financing options and the required changes in fiscal policy to ensure macroeconomic stability.
    Keywords: Public investment;Liberia;Infrastructure;Economic growth;Debt sustainability;Fiscal policy;Economic models;Public Investment, Growth, Debt Sustainability, Fiscal Policy, Infrastructure, Aid.
    Date: 2013–11–22

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