nep-afr New Economics Papers
on Africa
Issue of 2014‒05‒09
twelve papers chosen by
Christian Zimmermann
Federal Reserve Bank of St. Louis

  1. Working Paper 201 - Does Intra-African Trade Reduce Youth Unemployment in Africa By John Anyanwu
  2. Sub-Saharan Africa's recent growth spurt : an analysis of the sources of growth By Cho, Yoonyoung; Tien, Bienvenue N.
  3. CAN DREAMS COME TRUE? ELIMINATING EXTREME POVERTY IN AFRICA BY 2030 By Mthuli Ncube; Zuzana Brixiova; Zorobabel Bicaba
  4. The reliability of South African real-time output gap estimates By Jessica Kramer and Greg Farrell
  5. Energy Sector is critical to Nigeria Growth and Development: Perspective to Electricity Sub-sector in Nigeria By Yusuf, Sulaimon Aremu
  6. The price is not always right : on the impacts of (commodity) prices on households (and countries) By Lederman, Daniel; Porto, Guido
  7. Working Paper 202 - Segmentation and efficiency of the interbank market and their implication for the conduct of monetary policy By Jacob Oduor; Moses Muse Sichei; Samuel Kiplangat Tiriongo; Chris Shimba
  8. Working Paper 200 - Analysis of Household Expenditures and the Impact of Remittances using a Latent Class Model: the Case of Burkina Faso By Nadège Désirée Yaméogo
  9. Subjective Well-being, Risk Perceptions and Time Discounting: Evidence from a large-scale cash transfer programme By Bruno Martorano; Sudhanshu Handa; Carolyn Halpern; Harsha Thirumurthy; UNICEF Innocenti Research Centre
  10. Assessing regional variation in the effect of the removal of user fees on institutional deliveries in rural Zambia By Chitalu M. Chama-Chiliba and Steven F. Koch
  11. Stability pact and risk of pro-cyclical fiscal policy in Economic and Monetary Union countries: the case of UEMOA By Mamadou Diop
  12. Construction of a Social Accounting Matrix for Chad By David S. Garber

  1. By: John Anyanwu
    Abstract: This study empirically estimates the effect of Africa’s intra-regional trade on the burgeoning youth unemployment in the Continent. We investigate both the aggregate and gender-specific impacts. Our empirical estimates, using available cross-sectional time series data over the period, 1980 and 2010, suggest that higher levels of intra-African trade reduce both the aggregate, female and male youth unemployment in Africa. In addition, our results show that domestic investment rate, institutionalized democracy, secondary education, inflation, economic growth, and higher urbanization tend to reduce youth unemployment both on the aggregate and gender-differentiated and therefore good for youth unemployment reduction in the continent. On the other hand, higher real per capita GDP and to a lesser extent credit to the private sector have significant positive effect on youth unemployment in Africa. Government consumption expenditure and foreign direct investment have insignificant effect on both the aggregate level and the gendered level of youth unemployment in Africa. Based on these results, some policy recommendations are proffered.
    Date: 2014–04–29
  2. By: Cho, Yoonyoung; Tien, Bienvenue N.
    Abstract: Since the mid-1990s, Sub-Saharan Africa has experienced unprecedented levels of high economic growth. A key question follows: What accounts for the turnaround of the growth performance in the mid-1990s? The answer can provide insight into whether the recent growth spurt in Sub-Saharan Africa is merely temporary or the beginning of a sustainable takeoff. This paper examines the sources of growth of 32 countries in Sub-Saharan Africa in a growth accounting framework. The findings suggest that the recent growth spurt is largely associated with an increase in the share of working-age population, capital accumulation, and total factor productivity, unlike previous periods. Resources play a role by attracting capital inflows, particularly from foreign direct investment and shifting labor away from agriculture. However, the growth prospects for Sub-Saharan Africa seem promising beyond resources, with steady progress in decreased fertility, increased foreign direct investment, political stability, and structural transformation.
    Keywords: Economic Growth,Achieving Shared Growth,Economic Theory&Research,Emerging Markets,Population Policies
    Date: 2014–05–02
  3. By: Mthuli Ncube; Zuzana Brixiova; Zorobabel Bicaba
    Abstract: With the year 2015 – the MDG finishing line – approaching, post-2015 goals as they impact Africa need to be firmed. The goal of ending extreme poverty remains paramount. Globally, the World Bank set goals to end extreme poverty by 2030 and to promote shared prosperity in every society. We examine feasibility of these objectives for Sub-Saharan Africa, the world’s poorest but rapidly rising region. We find that under plausible assumptions on consumption growth and redistribution, eliminating poverty by 2030 is out of the region’s reach. Even under our ‘best case’ scenario of accelerated growth and redistribution from the richest 10 percent to the poorest 40 percent of the population, the poverty rate would still be around 10 percent in 2030. A more realistic goal for the region would be reducing poverty by a range from half to two thirds. At this rate, especially if in part achieved by lowering inequality, the Africa region would meaningfully contribute to the global agenda. Policies need to focus on mutually reinforcing objectives of making growth stronger, resilient to shocks, and inclusive.
    Keywords: Poverty reduction, inequality, inclusive growth, Africa, numerical simulations
    JEL: I32 E21 J11 C63
    Date: 2014–04–01
  4. By: Jessica Kramer and Greg Farrell
    Abstract: Estimates of the output gap are an important component of policy-makers’ toolkits. Both the theory underlying monetary policy analysis and the empirical models employed by central banks suggest that the output gap is a key variable explaining inflation. In this view, the estimate of the output gap provides not only an indication of how well the economy is operating relative to its potential, it also signals whether inflation is likely to increase or decrease in the future. The reliability of estimates of the output gap is therefore extremely important for policy making. However, a large literature has highlighted both conceptual and practical problems in measuring the gap, including the difficulty of using real-time data that will be revised in the future. The contribution of this paper is to assess the reliability of real-time estimates of the South African output gap, by estimating output gaps using a range of univariate methods applied to real-time gross domestic product (GDP) data. Consistent with the results of similar studies conducted in other countries, it is found that the real-time South African output gap estimates are in fact quite unreliable and are significantly revised over time. Furthermore, the source of these revisions is largely attributed to new data points becoming available, indicating the unreliability of end-of-sample estimates, rather than data or parameter revisions.
    Keywords: Output gap, Real-time data, Monetary policy, South Africa
    JEL: C32 E32
    Date: 2014
  5. By: Yusuf, Sulaimon Aremu
    Abstract: This study explored empirically the ‘Energy Sector is critical Sector to Nigeria Economic growth and Development: Perspective to Electricity Subsector, the study covers the period of 1981 to 2011. The study is borne out of the curiosity to determine the importance of electricity to the socio-economic development in Nigeria having relegated its role as “electricity is just an intermediate input”. The quantitative technique is used in analyzing times series data on per capita GDP of Nigeria, Gross Capital formation as proxy of Capital, Post Secondary School Enrolment as proxy of Labour and Electricity consumption. Restricted Error Correction model (VAR) is used with the aid of Econometrics View Package (E- view). The study reveals that the long run relationship that exists between real gross domestic product (PCGDP) a proxy of economic growth/development and electricity consumption is not significant, while, there is existence of short run causality between electricity consumption and economic growth. Further investigation using Granger causality analysis reveals that the two variables granger causes one another. Attempt was made to analyse the Electricity Transmission Mechanism with respect to different subsectors of the economy as it is translated to economic development in the long run, if the sector is properly harnessed. This then bring the study to the conclusion that electricity is not just an intermediate input or resources of satisfying domestic needs alone but it is ‘a critical sector to economic development most especially to developing country like Nigeria’. Therefore necessary recommendations were made as a way forward to achieve the impressive, sustainable growth and inclusive development.
    Keywords: Electricity, Electricity Transmission Mechanism , Vector Error Correction Model (VECM)
    JEL: Q4
    Date: 2014–01
  6. By: Lederman, Daniel; Porto, Guido
    Abstract: This paper provides an overview of the impact of once-and-for-all changes in commodity prices and other prices on household welfare. It begins with a collection of stylized facts related to commodities based on household survey data from Latin America and Africa. The data uncover strong commodity dependence in both continents: households typically allocate a large fraction of their budget to commodities and they often depend on commodities to earn their income. This income and expenditure dependency suggests sizable impacts and adjustments following commodity-price shocks. The paper explores these effects with a review of the literature. It studies consumption and income responses, labor-market responses, and spillovers across sectors. It ends up providing evidence on the relative magnitudes of various mechanisms through which commodity prices affect household (and national) welfare in developing economies.
    Keywords: Markets and Market Access,Economic Theory&Research,Emerging Markets,Labor Policies,Access to Markets
    Date: 2014–05–01
  7. By: Jacob Oduor; Moses Muse Sichei; Samuel Kiplangat Tiriongo; Chris Shimba
    Abstract: This paper assesses the role that bank segmentation plays in the efficiency of the interbank market and the extent to which segmentation and inefficiency of the interbank market impedes the effectiveness of monetary policy. Using a unique (not public) Kenyan daily dataset for the period June 2003 to September 5 2012 obtained from the Central Bank of Kenya (CBK), and utilizing network framework and event studies, the findings show that the Kenyan interbank market is incomplete, segmented and inefficient and this impedes monetary policy effectiveness in the short run particularly during periods of liquidity volatility. Evidence however shows that monetary policy is still effective in the long run, notwithstanding inefficiencies at the interbank market. However, this should not be any consolation for monetary policy makers since monetary policy is intended to work in the short to medium term. To improve the efficiency of the interbank and its role as a channel of transmitting monetary policy in such underdeveloped interbank markets like Kenya, monetary authorities must broaden the product tenors, increase the number of currencies traded, link the interbank with other money market segments and address counterparty risks.
    Date: 2014–04–29
  8. By: Nadège Désirée Yaméogo
    Abstract: This paper applies a latent classes model to assess the impact of international remittances on households’ expenditures using 2010 cross-sectional data from Burkina Faso. Household expenditures are modeled using the Almost Ideal Demand System (AIDS). With the latent class model, these expenditure equations are estimated simultaneously for both groups of households as well as factors that explain the probability of being in one group or another. The latent class model is used to estimate eight di.erent expenditure equations: food, education, healthcare, durable goods, housing, fuel for cooking, communication (phone), and transportation. Results suggest that the household size, schooling, the age of the head of the household, farmer heads, female heads, access to electricity, living in urban areas, and international remittances contribute to explain household expenditure behavior. Factors that contribute to increase the household chance to live below the poverty line include: household size, if the household head is a farmer, a female, or is aged, or living in a province other than Kadiogo. Factors that increase the household chance of living above the poverty line are: the amount of remittances received, if the head of the household is educated, is Muslim, if the household has access to electricity or public water pump, or if the household lives in the province of Kadiogo. Results also suggested that all the consumption items are necessary goods for households living below the poverty line, and only two items (durable goods and housing) are luxury goods for those living above that line.
    Date: 2014–04–29
  9. By: Bruno Martorano; Sudhanshu Handa; Carolyn Halpern; Harsha Thirumurthy; UNICEF Innocenti Research Centre
    Abstract: The risk and time preferences of individuals as well as their subjective expectations regarding the future are likely to play an important role in choice behaviour. Measurement of these individual characteristics in large-scale surveys has been a recent development and empirical evidence on their associations with behaviour remains limited. We summarize the results of measuring individuals’ attitudes towards inter-temporal choice, risk, and the future in a large-scale field survey in Kenya. We find very low rates of inconsistency in interpreting questions on time and risk preferences. Cash transfers alone do not appear to impact time discounting or risk aversion, but they do have an important impact on subjective well-being measures and on future perceptions of quality of life.
    Keywords: risk; surveys; transfer income;
    Date: 2014
  10. By: Chitalu M. Chama-Chiliba and Steven F. Koch
    Abstract: This paper examines regional differences in the effect of user fee removal in rural areas of Zambia on the use of health institutions for delivery. The analysis uses quarterly longitudinal data covering 2003q1-2008q4. When unobserved heterogeneity, spatial dependence and quantitative supply-side factors are incorporated in the Interrupted Time Series (ITS) design, user fee removal is found to immediately increase aggregate institutional deliveries, although the national trend was unaffected. Drug availability and the presence of traditional birth attendants also influence institutional deliveries at the national level, such that, in the short-term, strengthening and improving community-based interventions could increase institutional deliveries. However, there is significant variation and spatial dependence masked in the aggregate analysis. The results highlight the importance of service quality in promoting institutional deliveries, and also suggest that social and cultural factors, especially in rural areas, influence the use of health facilities for delivery. These factors are not easily addressed, through an adjustment to the cost of delivery in health facilities.
    Keywords: Maternal care, Institutional devices, User fees, Spatial dependence
    JEL: I10 I18 I19 R10 R15 R58
    Date: 2014
  11. By: Mamadou Diop (CREM UMR CNRS 6211, University of Rennes 1, France)
    Abstract: In December 1999, the WAEMU countries have adopted the Pact of Convergence, Stability, Growth and Solidarity which states in its corrective arm, the basic fiscal balance, relative to nominal GDP, must be balanced. Implying that the presence of an unexpected adverse economic conditions, governments have a choice between respecting the fiscal criterion of the Covenant and not to support economic activity or stimulate economic activity through public spending and not meet the key criteria of the pact. This article's objective is to highlight the failures of the fiscal rule cannot be a lever action of public authorities and the consequences if it does not take into account the state of the economy. Two types of fiscal policies can be distinguished according to the economic situation: procyclical policy changing in the same direction as the business cycle and countercyclical fiscal policy that seeks to minimize fluctuations in economic conditions.
    Keywords: Politique budgétaire procyclique, UEMOA (WAEMU), Pacte de convergence et de stabilité, Solde budgétaire de base, Politique budgétaire contracyclique
    JEL: E6 C5
    Date: 2013–11
  12. By: David S. Garber
    Abstract: The use of Applied General Equilibrium (AGE) models to contribute to discussions on economic growth and poverty alleviation in less developed countries has become widespread, particularly as data collection capabilities have improved over the past several years. Nevertheless the existence of a Social Accounting Matrix (SAM), the central source of data for any AGE model, remains lacking for many developing countries, often rendering the AGE exercise impractical in such cases. This paper details the construction of a SAM for a particularly data-challenged context, that of Chad. The SAM was built for use in an AGE model that looks at the interactions between Chad’s oil revenue spending decisions and subsequent impacts on economic growth and household welfare. The resulting SAM is the only publically available example for Chad to account for economic flows at the dawn of the country’s oil economy. The paper offers the AGE researcher interested in data-poor countries an example of a strategy to weave together sparsely available information into a SAM of sufficient credibility as input to a model.
    Keywords: Social Accounting Matrix
    Date: 2014

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