nep-afr New Economics Papers
on Africa
Issue of 2016‒06‒14
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Poverty and shared prosperity implications of deep integration in Eastern and Southern Africa By Balistreri,Edward Jay; Maliszewska,Maryla; Osorio-Rodarte,Israel; Tarr,David; Yonezawa,Hidemichi
  2. Bundling Governance: Finance versus Institutions in Private Investment Promotion By Asongu, Simplice; Batuo, Enowbi; Tchamyou, Vanessa
  3. Liberation Technology: Mobile Phones and Political Mobilization in Africa By Marco Manacorda; Andrea Tesei
  4. What is the Effect of Economic Globalisation on the Productivity of the Manufacturing Sector of Ghana? By Yeboah Asuamah, Samuel; Broni Pinkrah, Samuel; Quansah Abbey, Paul
  5. Macroeconomic Determinants of Economic Diversification in Botswana By Sukumaran Nair, M.K.
  6. `Land Grab' or Development Opportunity?: The Effect of Transnational Farmland Investments on the Ghanaian Economy By Choi, Donggul
  7. Gauging financial conditions in South Africa By Nicolaas van der Wath

  1. By: Balistreri,Edward Jay; Maliszewska,Maryla; Osorio-Rodarte,Israel; Tarr,David; Yonezawa,Hidemichi
    Abstract: Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs are, especially in Sub-Saharan Africa. This paper decomposes trade costs into: (i) trade facilitation, (ii) non-tariff barriers, and (iii) the costs of business services. The paper assesses the poverty and shared prosperity impacts of deep integration to reduce these three types of trade costs in: (i) the East African Customs Union?Common Market of East and Southern Africa?South African Development Community"Tripartite"Free Trade Area; (ii) within the East African Customs Union; and (iii) unilaterally by the East African Customs Union. The analysis employs an innovative, multi-region computable general equilibrium model to estimate the changes in the macroeconomic variables that impact poverty and shared prosperity. The model estimates are used in the Global Income Distribution Dynamics microsimulation model to obtain assessments of the changes in the poverty headcount and shared prosperity for each of the simulations for the six African regions or countries. The paper finds that these reforms are pro-poor. There are significant reductions in the poverty headcount and the percentage of the population living in poverty for all six of the African regions from deep integration in the Tripartite Free Trade Area or comparable unilateral reforms by the East African Customs Union. Further, the incomes of the bottom 40 percent of the populations noticeably increase in all countries or regions that are engaged in the trade reforms. The reason for the poor share in prosperity is the fact that the reforms increase unskilled wages faster than the rewards of other factors of production, as the reforms tend to favor agriculture. Despite the uniform increases in income for the poorest 40 percent, there are some cases where the share of income captured by the poorest 40 percent of the population decreases. The estimated gains vary considerably across countries and reforms. Thus, countries would have an interest in negotiating for different reforms in different agreements.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Emerging Markets,Trade Law
    Date: 2016–05–04
  2. By: Asongu, Simplice; Batuo, Enowbi; Tchamyou, Vanessa
    Abstract: Abstract Purpose – The study extends the debate on finance versus institutions in the promotion of investment documented by Acemoglu and Johnson (2005), Ali (2013) and Asongu (2014). We assess the effects of various components of governance on private investment, notably: political, economic and institutional governances. Financial indicators of depth, allocation efficiency, activity and size are used. Design/methodology/approach – An endogeneity robust dynamic system GMM estimation technique is employed. Principal component analysis is also employed to reduce the dimensions of governance variables. The empirical evidence is based on 53 African countries for the period 1996-2010. Findings – The findings provide support for the quality of governance as a better determinant of private investment than financial intermediary development. Moreover, the evidence of finance and governance as substitutes in their impact on investment implies that good governance fuels private investment and this positive impact is stronger in nations with less developed financial systems. This finding is consistent with Ali (2013) and contrary to the results of Asongu (2014c). Practical implication – Policy measures for fighting involuntary and voluntary surplus liquidities are discussed. The paper provides additional support for the need of strengthening governance institutions to promote investment on the one hand and fighting financial allocation inefficiency by mitigating surplus liquidity issues on the other hand. Originality/value – The paper extends the debate on the substitution of finance and institutions in the promotion of private investment.
    Keywords: Finance; Institutions; Investment: Property Rights; Africa
    JEL: E02 G20 G24 O55 P14
    Date: 2015–12
  3. By: Marco Manacorda (Queen Mary University of London, CEP (LSE), CEPR & IZA); Andrea Tesei (Queen Mary University of London and CEP (LSE))
    Abstract: Can digital information and communication technology (ICT) foster mass political mobilization? We use a novel geo-referenced dataset for the entire African continent between 1998 and 2012 on the coverage of mobile phone signal together with geo-referenced data from multiple sources on the occurrence of protests and on individual participation in protests to bring this argument to empirical scrutiny. We find that mobile phones are instrumental to mass mobilization during economic downturns, when reasons for grievance emerge and the cost of participation falls. Estimated effects are if anything larger once we use an instrumental variable approach that relies on differential trends in coverage across areas with different incidence of lightning strikes. The results are in line with insights from a network model with imperfect information and strategic complementarities in protest provision. Mobile phones make individuals more responsive to both changes in economic conditions - a mechanism that we ascribe to enhanced information - and to their neighbors’ participation - a mechanism that we ascribe to enhanced coordination. Empirically both effects are at play, highlighting the channels through which digital ICT can alleviate the collective action problem.
    Keywords: mobile phones, collective action, Africa, geo-referenced data
    JEL: D70 O55 L96
    Date: 2016–04
  4. By: Yeboah Asuamah, Samuel; Broni Pinkrah, Samuel; Quansah Abbey, Paul
    Abstract: The research paper investigates the stable long run hypothesis between globalisation and manufacturing sector productivity for Ghana for the period 1961-2013 using annual time series data. The augmented Dickey Fuller (ADF, for unit root analysis) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS, unit root analysis), OLS (regression analysis), Johansen test (long run analysis), VECM (short run analysis), and the granger causality (causality analysis) tests were used. The findings suggest the data were integrated of order one. The findings of the study seem to indicate that the manufacturing sector has not benefited from globalisation. There is the need to introduce various policy measures such as improvement in security to reduce risk and uncertainty of foreign investment into the manufacturing sector; improvement in infrastructure to encourage domestic and foreign investment into the manufacturing sector; and strong political will to attract investors into the sector. Further studies should consider the effect of other factors (electricity) and other proxies of globalisation (foreign direct investment, financial liberalisation, investment liberalisation, and multinational firm activity) on the manufacturing sector performance to determine if the findings will be replicated. The issues of structural breaks should be investigated in future studies.
    Keywords: Manufacturing Sector, Trade Openness, Globalisation, Long Run
    JEL: F14 L6
    Date: 2016–05–17
  5. By: Sukumaran Nair, M.K. (University of Botswana)
    Abstract: Botswana, a sparsely populated middle income developing country in Southern Africa has been dependent on a single resource, diamond. Despite having high growth and high percapita incomes, the rates of unemployment and poverty have been quite high. Hence, the government has put in intense efforts towards diversification of the economy, but the success rate has been dismal. Some limited degree of diversification has occurred in the services sector. Even the latest government budget gives a great deal of importance to the diversification drive. Hence it is imperative to take a look at the factors that drive to the limited diversification observed so far and to see what lessons can be learned from that for taking further steps towards the desired goal. From the literature and from an understanding of the Botswana economy, the following explanatory variables were picked up to run a multivariate regression model. GDP Growth Rates, Share of Mining Output in GDP, Ratio of Gross Fixed Capital Formation to GDP, Ratio of Public Expenditure to GDP, Share of Tax Revenues in GDP, Annual Rate of Inflation, Share of Total Trade in GDP as a proxy for openness, Ratio of FDI to GDP and Exchange Rate. We took the coefficient of variation of sectoral shares as a proxy for economic diversification. Gross fixed capital formation and public expenditure were dropped as they were found to be highly collinear with some other variables. The estimates are found to be very robust with Adjusted R2 as high as 0.94. Mining GDP, Share of Taxes, Exchange Rates and GDP Growth are found to be significant at 5% level. Inflation is significant at 10% level. The study shows that still Mining share seems to be the driver of the limited diversification in Botswana. Higher the share of taxes, higher is the degree of diversification. An appreciation in exchange rates seem to be encouraging imports of inputs for various sectors to assist the diversification process. A negative sign for growth rates show that the efforts to diversification becomes effective, when the economy grows slowly and diversification happens to be the only way out. Inflation also affects diversification inversely. The Policy implication of the study is that the revenues from mining will have to be used prudently to effect diversification in the economy. Appropriate fiscal and monetary policies will have to be put in place to promote the diversification process in the economy.
    Keywords: Botswana,Economic Diversification,Macroeconomic determinants, Multivariate Regression, Policy implications
    JEL: E27 A10 O11
  6. By: Choi, Donggul
    Abstract: Financial support from the Center for International Food and Agricultural Policy and Thesis Research Travel Grants, University of Minnesota, is acknowledged.
    Keywords: farmland investment, large-scale land acquisition, foreign direct investment, economic growth, growth model, computable general equilibrium, Ghana, Agricultural and Food Policy, International Development, Land Economics/Use, Resource /Energy Economics and Policy, F21, F43, O13, O41, O55, Q15, Q16,
    Date: 2016–05–25
  7. By: Nicolaas van der Wath (Bureau for Economic Research)
    Abstract: This paper investigates the relevance of financial conditions indices (FCIs) as an additional gauge of South Africa’s economic metabolism. As a starting point, a background is provided on FCIs in terms of evolution, methodologies and uses. In general, FCIs were found to have a very broad definition, are used for different purposes and can be calculated with different statistical techniques. The first step in developing an FCI for South Africa was to identify a purpose for it. From the purpose followed the data selection, sourced from regular updated financial data since 2003. The selection was differentiated from other South Afri-can FCIs by including commodity prices, as well as BER financial survey data. The final selection of indicators was tested for unit roots. The second process was the calculation of weights, in which case the principle components method was used. However, to avoid revising the historical data of the FCI each new month, a real-time principle component series was constructed. This method implies that the weights are recalculated every month, based on a rolling window of 60 months historical data, starting from 2005 onwards. In the third and final step, the real-time principle component series was purged from the real-time nominal GDP growth rate (capturing both output and inflation). The purged real-time principle component series was taken as the final FCI. The impact of the global financial crisis and the drastic monetary policy that followed is clearly visible in the FCI. The periodical divergence between the FCI and the real economy also served as an indication on the effectiveness of monetary policy. This FCI was found, over shorter horizons, to lead economic growth by nine months, and it improved on a naive forecast of GDP growth.
    Keywords: financial conditions, principle components, factor models, leading indicator, financial survey, business cycle
    JEL: G19 E39 C10
    Date: 2016

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