nep-afr New Economics Papers
on Africa
Issue of 2016‒03‒23
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The drivers of real sector growth in Malawi: an empirical investigation By Chirwa, Themba G; Odhiambo, Nicholas M
  2. Comovement Between Africa and Advanced Economies: 1980-2011 By Carike Claassen, Elsabe Loots and Alain Kabundi
  3. Financial Innovation and Money Demand: Evidence from Sub-Saharan Africa By J Paul Dunne and Elizabeth Kasekende
  4. Estimating South Africa's Output Gap Potential Growth Rate By Johannes W. Fedderke and Daniel K Mengisteab
  5. "Peer Effects on Vaccination: Experimental Evidence from Rural Nigeria" By RyokoSato; Yoshito Takasaki
  6. Does Privatization Increase Firm Performance in Nigeria?: An Empirical Investigation By Usman, Ojonugwa; Olorunmolu, Joseph O.
  7. "The Influence of Ancestral Lifeways on Individual Economic Outcomes in Sub-Saharan Africa" By Stelios Michalopoulos; Louis Putterman; David Weil

  1. By: Chirwa, Themba G; Odhiambo, Nicholas M
    Abstract: The paper empirically investigates the key macroeconomic determinants of growth in Malawi, using the recently developed ARDL bounds-testing approach. The paper is motivated by the social and economic hardships that Malawi has been facing in recent years. The study reveals that the key macroeconomic determinants that were significantly associated with economic growth include investment, human capital development, population growth, real exchange rate depreciation, inflation, and international trade. We find that, in the short-run, investment, population growth, real exchange rate depreciation, and international trade are positively associated with economic growth, while inflation is negatively associated with economic growth. However, the long-run results reveal that investment, human capital development, and international trade are positively associated with economic growth, while population growth and inflation are negatively associated with economic growth. These results have significant policy implications; since the economic strategies needed to increase economic growth in Malawi should focus on promoting incentives that attract investment, improve the quality of education, reduce population growth, ensure currency and inflation stability, and promote export diversification.
    Keywords: Malawi; Autoregressive Distributed Lag Models; Economic Growth
    Date: 2016–03
  2. By: Carike Claassen, Elsabe Loots and Alain Kabundi
    Abstract: This paper analyses business cycle comovement between African economies and advanced economies. It covers the period 1980 to 2011. The empirical analysis is based on the Dynamic Factor Model applied to annual data for African and G7 countries, covering the period 1980 to 2011. The results indicate that middle-income African countries show consistent business cycle variance shares, both before and after controlling for the influence of the G7. This implies that while middle-income African countries have coupled to the G7 business cycle since the 1980s, they have also coupled among themselves. Trade appears to be the important factor underlying the comovement. This is not the case for oil exporting countries and low-income economies that have, after controlling for the influence of the G7, all decoupled during the Great Recession. The case for fragile states is not conclusive, although these states do rely much more on trade with other African groups than with the G7.
    Keywords: dynamic factor analysis, Business Cycle, decoupling
    JEL: E32 F44 G01 O55
    Date: 2016
  3. By: J Paul Dunne and Elizabeth Kasekende
    Abstract: While the effect of financial innovation on money demand has been widely researched in industrialised countries, because of its major role in monetary policy, few studies have focussed on developing countries. This is surprising given the considerable growth in financial innovation in Sub-Saharan Africa in recent years and its potential implications for developing country macroeconomic policy. This paper investigates the development of financial innovation and its impact on money demand in the region using panel data estimation techniques for 34 countries between 1980 and 2013. The results indicate that there is a negative relationship between financial innovation and money demand. This implies that financial innovation plays a crucial role in explaining money demand in Sub-Saharan Africa and given innovations such as mobile money in the region this can have important implications for future policy design.
    Keywords: Money demand, financial innovation
    JEL: E41
    Date: 2016
  4. By: Johannes W. Fedderke and Daniel K Mengisteab
    Abstract: This paper estimates the potential output of the South African economy using several univariate filters as well as taking a production function approach. Our aim is to compare the sensitivity of the results to the different methodologies and different measurements of output. We find that the potential output is sensitive to the different methodologies and different measures of output. A Cobb-Douglas specification of the production function is employed, dividing the economy into eight sectors. We find that the production function produced results similar to the band-pass filters but with gaps of lower amplitudes. We then use the Hodrick-Prescott, Christiano-Fitzgerald, and a Kalman filter to observe the natural growth rate of the South African economy from 1960 to 2015. We find estimates of the natural growth rate in the 1.9% - 2.3% range. However, there is also evidence to suggest that the rate is under considerable downward pressure in the post-2010 period. The strongest decline is in the real sectors of the economy (Manufacturing, Mining), the greatest resilience in the service sectors (financial in particular).
    Keywords: manufacturing, mining, South Africa
    Date: 2016
  5. By: RyokoSato (Global Asia Institute, National University of Singapore); Yoshito Takasaki (Faculty of Economics, The University of Tokyo)
    Abstract: Understanding how and why social interactions matter for people's vaccination behavior is important for disease control. This paper conducts the first causal analysis of peer effects on vaccination in developing countries. We created exogenous variations in peers' vaccination behaviors by randomizing cash incentives for tetanus vaccine take-up among Nigerian women. Vaccine take-up among friends strongly increased women's take-up; having a friend getting vaccinated increases the likelihood that one receives a vaccination by 18.9 percentage points. The peer effects among friends are heterogeneous by one's belief about vaccine safety and access to health clinics in a way that is consistent with whether or not a woman visits a clinic with her friend. This provides evidence for collective action as a mechanism underlying the positive peer effect.
  6. By: Usman, Ojonugwa; Olorunmolu, Joseph O.
    Abstract: This paper examined the validity of the efficacy of privatization by investigating not only whether privatization has improved financial (profitability) performance of firms but also whether such improvement has impact on the operational efficiency of privatized firms for the period 1990-2001 in Nigeria. Using a panel data for a sample of 20 privatized firms obtained from the Nigerian Stock Exchange and Securities and Exchange Commission, the result showed an increase in all the profitability ratios after privatization. However, only the return on assets and return on sales were significant in explaining the difference between pre- and post-privatization performance of firms in Nigeria. The result of the operational efficiency showed a significant increase in the mean (median) values of sale efficiency and income efficiency. Interestingly, while output (real sales) and employee income of firms significantly increased after privatization, the number of employees decreased insignificantly after privatization. The paper concluded that privatization in Nigeria has worked in the sense that it improves the financial and operational efficiency performance of firms.
    Keywords: Privatization, Firm performance, Operational Efficiency, Profitability, Nigerian Stock Exchange
    JEL: L32
    Date: 2015–10–03
  7. By: Stelios Michalopoulos; Louis Putterman; David Weil
    Abstract: We explore the role of an individual's historical lienage in determining economic status, holding constant his or her current location. This is complementary to the more common approachto studying how history shapes economic outcomes across locations. Motivated by a large literature in social sciences stressing the beneficial influence of agricultural transition on contemporary economic perfromance at the level of countries, we examine the relative status of descendants of agriculturalists vs. pastoralists. We match individual-level survey data with information on the historical lifeways of ancestors, focusing in Africa, where the transition away from such modes of production began only recently. Within enumeration areas and occupational groups, we find that individuals from ethnicities that derived a larger share of subsistence from agriculture in the pre-colonial era are today more educated and wealthy. A tentative exploration of channels suggests that differences in attitudes and beliefs as well as differential treatment by others, including less political power, may contribute to these divergent outcomes.
    Date: 2016

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