nep-afr New Economics Papers
on Africa
Issue of 2014‒01‒24
fifteen papers chosen by
Quentin Wodon
World Bank

  1. Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Ghana, South Africa and the WAEMU By Fadia Al Hajj; Gilles Dufrénot,; Kimiko Sugimoto; Romain Wolf
  2. Poverty reduction and investing in people : the new role of safety nets in Africa experiences from 22 countries By Monchuk, Victoria
  3. Response to “PEPFAR Program Expenditures” [Form Number: DS-4213, OMB Control Number: 1405-0208] – Third Revision By Douglas, J.
  4. Nutrition and economic growth in South Africa: A momentum threshold autoregressive (MTAR) approach By Phiri, Andrew; Dube, Wisdom
  5. Farmland Investments in Africa: What’s the Deal? By Di Corato, Luca; Hess, Sebastian
  6. Asymmetric co-integration and causality effects between financial development and economic growth in South Africa By Phiri, Andrew
  7. A Demographic Dividend for Sub-Saharan Africa: Source, Magnitude, and Realization By Bloom, David E.; Humair, Salal; Rosenberg, Larry; Sevilla, J.P.; Trussell, James
  8. Terms of Trade Instability, Economic Vulnerability and Economic Growth: The Role Of Institutions in Sub-Saharan Africa By Zaouali, Amira
  9. State-Owned Enterprise Governance: A Stocktaking of Reforms and Challenges in Southern Africa By Sara Sultan Balbuena
  10. Inside the Metrics – An Empirical Comparison of Energy Poverty Indices for Sub-Saharan Countries By Gunther Bensch
  11. On the impact of microcredit: Evidence from a randomized intervention in rural Ethiopia By Alessandro Tarozzi; Jaikishan Desai; Kristin Johnson
  12. The implication of contracting out health care services: The case of service level agreements in Malawi By Mpakati Gama, Elvis; McPake, Barbara; Newlands, David
  13. Export Restrictions on Raw Materials: Experience with Alternative Policies in Botswana By Jane Korinek
  14. Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi By Raymond P. Guiteras; B. Kelsey Jack

  1. By: Fadia Al Hajj; Gilles Dufrénot,; Kimiko Sugimoto; Romain Wolf
    Abstract: The aim of this paper is to examine the monetary policy actions through which the central banks in the Sub-Saharan African countries have searched to eliminate the negative impacts of the shocks facing their economies. We compare two types of monetary policy regimes: a currency board regime (in the CFA zone countries) and an inflation targeting policy regime (in Ghana and South Africa). We compare the properties of both policies when the central banks respond to three negative shocks hitting the economies: a recessionary demand shock, a supply shock increasing inflation and a negative fiscal shock. We propose an FPAS model (forecasting and monetary policy analysis system) that extends the usual FPAS models used in the literature to evaluate the impact of several policies in response to different types of exogenous shocks. We find that both policies are inappropriate to help the economies exiting from the effects of negative demand shocks (the adjustment relies mainly on fiscal policy), both are essential when negative shocks to primary balance occur (fiscal policy aggravates the negative effects of the shocks), while inflation targeting dominates the currency board regime as a strategy to cope with positive shocks to inflation.
    Keywords: inflation target, currency board, African countries
    JEL: E52 F41 Q33
    Date: 2013–11–15
  2. By: Monchuk, Victoria
    Abstract: Safety nets are on the rise in Africa, and beginning to evolve from scattered standalone programs into systems. Until recently, many African countries approached social protection on an ad-hoc basis. But when the global crisis threatened recent progress in poverty reduction, safety nets increasingly began to be viewed as core instruments for poverty reduction in the region. Social protection programming has started to develop from emergency food aid programs to one-off interventions to regular and predictable safety nets, such as targeted cash transfers and cash-for-work programs. Some countries, such as Kenya, Mozambique, Rwanda and Tanzania, now seek to consolidate programs into national systems. But as our review shows, there is still a long way to go.
    Keywords: Safety Nets and Transfers,Labor Policies,Regional Economic Development,Rural Poverty Reduction,Social Protections&Assistance
    Date: 2013–11–01
  3. By: Douglas, J.
    Abstract: This response document will briefly address concerns about the ethical, legal and methodological flaws with past research informing aspects of present PEPFAR program areas; concerns about adverse consequences of PEPFAR program areas; and concerns about the absence of oversight of the activities of PEPFAR funding recipients.
    Keywords: Africa, Bioethics, CDC, Circumcision, Ethics, Foreign Aid, Foreign Policy Analysis, Global Health, HIV/AIDS, International health, Kenya, Male Circumcision, Namibia, NIAID, NIH, PEPFAR, Public Health, South Africa, Zambia, Zimbabwe
    JEL: I18
    Date: 2013–12–21
  4. By: Phiri, Andrew; Dube, Wisdom
    Abstract: Purpose: This purpose of our paper is to examine asymmetric co-integration effects between nutrition and economic growth for annual South African data from the period 1961-2013. Design/methodology/approach: We deviate from the conventional assumption of linear co-integration and pragmatically incorporate asymmetric effects in the framework through a fusion of the momentum threshold autoregressive and threshold error correction (MTAR-TEC) model approaches, which essentially combines the adjustment asymmetry model of Enders and Silkos (2001); with causality analysis as introduced by Granger (1969); all encompassed by/within the threshold autoregressive (TAR) framework, a la Hansen (2000). Findings: The findings obtained from our study uncover a number of interesting phenomena for the South Africa economy. Firstly, in coherence with previous studies conducted for developing economies, we establish a positive relationship between nutrition and economic growth with an estimated income elasticity of nutritional intake of 0.15. Secondly, we find bi-direction causality between nutrition and economic growth with a stronger causal effect running from nutrition to economic growth. Lastly, we find that in the face of equilibrium shocks to the variables, policymakers are slow to responding to deviations of the variables from their co-integrated long run steady state equilibrium. Originality/value: In our study, we make a novel contribution to the literature by exploring asymmetric modelling in the correlation between nutrition intake and economic growth for the exclusive case of South Africa.
    Keywords: Nutrition; Economic growth; Threshold co-integration; Asymmetric causality; South Africa
    JEL: C12 C13 E20 I15
    Date: 2014–01–14
  5. By: Di Corato, Luca (Department of Economics, Swedish University of Agricultural Sciences); Hess, Sebastian (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: Large-scale foreign investments in African farmland are rising and may contribute to agricultural productivity growth and economic development. However, host countries sometimes have to wait longer for the economic bene…ts to arrive than initially expected. In this respect, the timing of project development is crucial and depends on the economic incentives provided to the investors. We therefore present a dynamic stochastic programming model that re‡ects the typical bargaining situation concerning large land deals in Africa and allows the e¤ect of market- and country-speci…c risks and taxation to be assessed. The model shows that commodity price volatility increases the value of the land development option, but slows down the land development process. Furthermore, it shows that host country attempts to negotiate …xed commitments to the speed of project development may run counter to the structure of economic incentives at the project site. The applicability of the model is demonstrated for a recent 10,000-hectare cotton project in Ethiopia. Response surface estimations suggest that Ethiopia has negotiated a contract under which it will receive about half the expected total project value, as long as it levies the regular corporate tax rate.
    Keywords: foreign direct investment; land leasing; real options; nash bargaining
    JEL: C61 D81 F23 Q24 Q58
    Date: 2013–12–13
  6. By: Phiri, Andrew
    Abstract: This paper investigates asymmetric co-integration and causality effects between financial development and economic growth for South African data spanning over the period of 1992 to 2013. To this end, we make use of the momentum threshold autoregressive (MTAR) approach which allows for threshold error correction (TEC) modelling and granger causality analysis between the variables. In carrying out our empirical analysis, we employ six measures of the financial development variables against gross domestic per capita, that is, three measures which proxy banking activity and another three proxies for stock market development. The empirical results generally indicate an abrupt asymmetric co-integration relationship between banking activity and economic growth, on one hand, and a smooth co-integration relationship between stock market activity and economic growth, on the other hand. Moreover, causality analysis generally reveals that while banking activity tends to granger causes economic growth, stock market activity is, however, caused by economic growth increase.
    Keywords: Financial development; Economic growth; Threshold co-integration; Asymmetric causality; Emerging economy; South Africa
    JEL: C32 E51 E58 G21 G23 G28
    Date: 2014–01–20
  7. By: Bloom, David E. (Harvard University); Humair, Salal (Harvard School of Public Health); Rosenberg, Larry (Harvard School of Public Health); Sevilla, J.P. (George Mason University); Trussell, James (Princeton University)
    Abstract: Managing rapid population growth and spurring economic growth are among the most pressing policy challenges for Sub-Saharan Africa. We discuss the links between them and investigate the potential of family planning programs to address these challenges. Specifically, we estimate the impact of family planning programs on income per capita that can arise via the demographic dividend (DD), a boost to per capita income that operates through a chain of causality related to declining fertility. We develop a model to determine the impact of "meeting unmet need" (MUN) for modern contraceptive methods on fertility and hence on the population age structure in the coming years. We also estimate empirically the DD that has been observed in other countries, using a cross-country regression with panel data covering 40 years. Using the age structure projected by MUN and the empirical estimates of the DD, we estimate the potential for additional economic growth in Kenya, Nigeria, and Senegal. We find that in 2030, these countries can enjoy an increase in per capita income of 8-13% by meeting one-third of their unmet need for modern contraception and can enjoy a 31-65% higher income per capita by meeting all of the unmet need. By 2050, these ranges become 13-22% and 47-87% respectively. We discuss the policy implications of our findings.
    Keywords: aging, health care, labor studies
    JEL: J11 J13 O55
    Date: 2013–12
  8. By: Zaouali, Amira
    Abstract: Economists have a long argue that institutions and implementation of good governance are important for economic growth. The main objective of this research is to demonstrate that one of positive institutions effects is its ability to mitigate the negative effect of economic vulnerability linked to terms of trade fluctuations on economic growth. The impact of the economic vulnerability and implementation of good governance are estimated for a panel of 15 Sub-Saharan-Africa countries over the period 1996-2011. The results show that good institutional quality helps to undermine the negative effects of economic vulnerability on economic growth. It is also clear from this analysis that the interaction terms between trade openness and institutions can reduce the negative effects of economic vulnerability and that trade openness has a positive effect on economic growth only until a certain level of institutional quality.
    Keywords: Economic vulnerability, instability of terms of trade, economic growth, institutions.
    JEL: C23 O43 O47
    Date: 2014–01–14
  9. By: Sara Sultan Balbuena
    Abstract: This report is the first known stocktaking of its kind to provide a regional overview of state-owned enterprise (SOE) governance reforms and challenges across the Southern African Development Community (SADC) region. Part One summarises the challenges and governance practices related to state-ownership across SADC economies; it draws conclusions on how to address common regional priorities. Part Two of the report is organised around country profiles providing a fact-based assessment of SOE reform policies and practices in 14 economies. The report was prepared at the request of the Southern Africa Network on Governance of State-Owned Enterprises – a regional cooperation initiative aimed at improving the corporate governance of SOEs, and mainly covering the member economies of the SADC region. The stocktaking was prepared based on information self-reported by authorities in participating economies and supplemented by desk research.
    Keywords: government policy and regulation, restructuring, merger and acquisition, financial economics, corporate governance
    JEL: G3 G30 G34 G38 G39
    Date: 2014–01–15
  10. By: Gunther Bensch
    Abstract: With the ‘Sustainable Energy for All’ initiative led by the UN and World Bank, the provision of access to modern energy has recently been brought to the top of the international development agenda. However, there is yet little guidance on how to measure modern energy access or its deprivation, energy poverty. This paper discusses five energy poverty measurement approaches and compares their results empirically using a unique household dataset on five sub-Saharan countries. Due to a broad coverage of energy-related issues, this dataset accommodates the data requirements imposed by all metrics. The metrics turn out to perform quite differently in terms of the identification of the energy poor, sensitivities to parameter changes and data requirements. Based on the empirical findings, recommendations are made on essential features of the metrics to support the ambitious goals set out by the ‘Sustainable Energy for All’ initiative.
    Keywords: Energy poverty measurement; energy access; sub-Sahara Africa
    JEL: C81 I32 O13
    Date: 2013–12
  11. By: Alessandro Tarozzi; Jaikishan Desai; Kristin Johnson
    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 microfinance 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: Mpakati Gama, Elvis; McPake, Barbara; Newlands, David
    Abstract: Background: The Malawi government in 2002 embarked on an innovative health care financing mechanism called Service Level Agreement (SLA) with Christian Health Association of Malawi (CHAM) institutions that are located in areas where people with low incomes reside. The rationale of SLA was to increase access, equity and quality of health care services as well as to reduce the financial burden of health expenditure faced by poor and rural communities. This thesis evaluates the implications of SLA contracting out mechanism on access, utilization and financial risk protection, and determines factors that might have affected the performance of SLAs in relation to their objectives. Methods: The study adopted a triangulation approach using qualitative and quantitative methods and case studies to investigate the implications of contracting out in Malawi. Data sources included documentary review, in-depth, semi-structured interviews and questionnaire survey. The principal agent model guided the conceptual framework of the study. Results: We find positive impact on overall access to health care services, qualitative evidence of perverse incentives for both parties to the contracting out programme and that some intended beneficiaries are still exposed to financial risk. Conclusion: An important conclusion of this study is that contracting out has succeeded in improving access to maternal and child health care as well as provided financial risk protection associated with out of pocket expenditure. However, despite this improvement in access and reduction in financial risk, we observe little evidence of meaningful improvement in quality and efficiency, perhaps because SLA focused on demand side factors, and paid little attention to supply factors: resources, materials and infrastructure continued to be inadequate.
    Keywords: Contracting out,financial risk protection,health financing,transaction costs, incentives,revealed objective
    JEL: D7 D8 D82 H5 I3
    Date: 2013–08–06
  13. By: Jane Korinek
    Abstract: Demand for non-renewable natural resources is forecast to rise steadily over the coming decades. Underlying trends of long-term rising demand and falling supply of mineral resources will inevitably increase pressure on prices and intensify competition for scarce resources. This can create a substantial opportunity for development for minerals-rich countries. However, as suggested by the “resource curse” debate, broad-based economic development based on the extractive industries is far from assured. History suggests that not all countries, in particular many of those outside the OECD area, have benefitted economy-wide from their mineral resources: good governance and good policies are essential to benefit from their huge potential growth. Some countries have successfully regulated their mining sectors without resorting to highly distortive policies such as export restrictions. One such country is Botswana. This paper examines some of the policies in place in Botswana that have contributed to the governance and management of its substantial minerals sector. Lessons are drawn for minerals-rich countries keen to manage their raw materials sectors for increased economy-wide growth.
    Keywords: taxation, sovereign wealth funds, mining, tax revenue management, extractive industries, Botswana, beneficiation, Diamond Trading Company, SACU, royalties, resource curse debate, Debswana, gemstones, sustainable budget index, South African Customs Union, regulation, export restrictions, SWF, diamonds, De Beers, Pula fund
    JEL: O24 O55 Q32 Q37 Q38
    Date: 2014–01–14
  14. By: Raymond P. Guiteras; B. Kelsey Jack
    Abstract: An observed positive relationship between compensation and productivity cannot distinguish between two channels: (1) an incentive effect and (2) worker selection. We use a simplified Becker-DeGroot-Marschak mechanism, which provides random variation in piece rates conditional on revealed reservation rates, to separately identify the two channels in the context of casual labor markets in rural Malawi. A higher piece rate increases output in our setting, but does not attract more productive workers. Among men, the average worker recruited at higher piece rates is actually less productive. Local labor market imperfections appear to undermine the worker sorting observed in well-functioning labor markets.
    JEL: C93 J22 J24 J33 O12
    Date: 2014–01
  15. By: David SAHN; Aurore PELISSIER; Francesca MARCHETTA (Université d'Auvergne); Frédéric AUBERY; Catalina HERRERA ALMANZA (Université Cornell); Harivelo RAJEMISON (INSTAT Madagascar); Faly RAKOTOMANANA (INSTAT Madagascar); Kira VILLA (Université Cornell)
    Abstract: This report provides a preliminary descriptive analysis of the Madagascar Youth Transition Survey 2012–13 (Enquête Statistique sur les itinéraires de vie des jeunes à Madagascar 2012-13). This survey is the last round of a cohort panel following children from around age 8 (for about half the sample) or age 15 (for the remainder) to their early 20s. The first two surveys were mainly focused on schooling and skills and were complemented by school surveys and by community surveys. This new survey re-interviewed the cohort members and their households and updated the community information. This last round of the survey was designed to improve our understanding of the determinants and impacts of the major life course transitions—involving marriage, family, schooling, and work—of young people in Madagascar. The purpose of this report is to provide the reader with a sense of the scope and nature of the data set and with some information about the lives of young adults in Madagascar.
    Date: 2013

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