nep-afr New Economics Papers
on Africa
Issue of 2018‒04‒16
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Corruption, Political Instability and Development Nexus in Africa: A Call for Sequential Policies Reforms By Adefeso, Hammed
  2. Does unemployment aggravate suicide rates in South Africa? Some empirical evidence By Andrew Phiri; Doreen Mukuka
  3. African stock markets integration: an analysis of the relationship between major stock markets in Africa By Izunna Anyikwa; Micheal Brookes; Pierre Le Roux
  4. Determinants of Loans’ Growth in Microfinance Institutions: The Case of Sub-Saharan Africa and Comparisons with other Regions of the World By Eliud Moyi; Eftychia Nikolaidou
  5. Effect of natural resources extraction on energy consumption and carbon dioxide emission in Ghana By Kwakwa, Paul Adjei; Alhassan, Hamdiyah; Adu, George
  6. Exchange Rate Policy and External Vulnerabilities in Sub-Saharan Africa: Nominal, Real or Mixed Targeting? By Fadia Al Hajj; Gilles Dufrenot; Benjamin Keddad
  7. The Long-Term Effects of African Resistance to European Domination: Institutional Mechanism By Kodila-Tedika, Oasis; Asongu, Simplice
  8. A Rebalancing Act for China and Africa; The Effects of China’s Rebalancing on Sub-Saharan Africa’s Trade and Growth By Roger Nord; Wenjie Chen

  1. By: Adefeso, Hammed
    Abstract: The study examined the extent of the effect of control of corruption and political (in)stability on economic development in African countries. The study employed System General Method of Moment (GMM) framework on recent pooled of data from thirty-seven African countries over a period of 1996 and 2016.The study found evidence of political instability though not statistically significant and ineffective control of corruption in African countries. The study also found that simultaneous implementation of policies towards ensuring political stability and effective control of corruption are not complementary and has more negative impact on development in the region. Both policies are substitute in the context of African economy, and hence should be pursued through sequential reforms. This study also found that continuous implementation of the current policies towards having both political stability and effective corruption control may not have positive impact on development in Africa. The study strongly supports sequential policy reform in the region and also recommends review of the ongoing policies towards ensuring effective control of corruption in the region.
    Keywords: Political instability; corruption; development; GMM; Africa
    JEL: O1 O17
    Date: 2018–02–28
  2. By: Andrew Phiri (Department of Economics, Nelson Mandela University); Doreen Mukuka (Department of Economics, Finance and Business Studies, CTI Potchefstroom Campus)
    Abstract: Our study investigates the cointegration relationship between suicides and unemployment in South Africa using annual data collected between 1996 and 2015 applied to the ARDL model. Furthermore, suicide data is further disintegrated into ‘sex’ and ‘age’ demographics. Our empirical results indicate that unemployment is insignificantly related with suicide rates with the exception for citizens above 75 years. On the other hand, other control variables such as per capita GDP, inflation and divorce appear to be more significantly related with suicides. Collectively, these findings have important implications for policymakers.
    Keywords: Unemployment, Suicide, Cointegration, Causality, South Africa, Sub Saharan Africa (SSA).
    JEL: C22 C51 E24 E31
    Date: 2017–07
  3. By: Izunna Anyikwa (Department of Economics, Nelson Mandela University); Micheal Brookes (Hertfordshire Business School); Pierre Le Roux (Department of Economics, Nelson Mandela University)
    Abstract: This paper examines the dynamic relationships between thirteen major stock markets in Africa in normal times and in times of financial crises using the Johansen cointegration and Granger causality methodologies. The empirical results revealed evidence of time-varying relationships among African stock markets. While the long-run relationships among the markets were strong prior to the 2007 global financial crisis (GFC) and during the Eurozone sovereign debt crisis (ESDC) periods, the relationships were severely weakened during the period of the GFC. The result also revealed a high degree of short-run dynamic causal relationships among African stock markets during both crises periods compared to the pre-crisis period.
    Keywords: African stock markets, Cointegration, Financial crisis, Integration
    JEL: C12 C13 C32
    Date: 2018–03
  4. By: Eliud Moyi (School of Economics, University of Cape Town); Eftychia Nikolaidou (School of Economics, University of Cape Town)
    Abstract: The purpose of this study is to identify factors that explain variations in loan growth in sub-Saharan African microfinance institutions and, if such factors exist, to investigate whether they predict loan growth differences in other regions.To address these objectives, the study merges data from 745 microfinance institutions with macro-institutional data from 37 countriesin Sub-Saharan Africa. The data is corrected for dynamic panel bias by applying a modelling strategy that accommodates endogeneity through the two-step system generalised method of moments estimators. The results show that loan growth is higher in microfinance institutions that are facing lower risk exposure, those that are having higher capital asset ratios and among those that are already having high loan growth. Furthermore, results indicate that loan growth is higher in countries with better economic prospects, and in those with sound private sector policies and regulations. Against expectations, loan growth is faster in countries with poor legal rights of borrowers and lenders. Results also suggest that variables that enter the Sub-Saharan Africa regressions significantly do not enter the regressions for the other regions with the same effect.These results point to the need for interventions that mainstream regional and even country-level heterogeneity.
    Date: 2018
  5. By: Kwakwa, Paul Adjei; Alhassan, Hamdiyah; Adu, George
    Abstract: Even though many studies have attempted to understand the drivers of carbon dioxide emission and energy consumption to help tackle environmental issues, not much has been done to estimate the effect of natural resources extraction on these two variables. This study analyzes the long run environmental effect of natural resources extraction in Ghana under the Stochastic Impacts by Regression on Population, Affluence and Technology model for the period of 1971-2013. Estimation results indicate that income, urbanization, and extraction of natural resources contribute to Ghana’s environmental problems of rising carbon emission and energy consumption. However, international trade is found to reduce carbon emission. The implications from the results are discussed and the paper recommends among other things the need to strictly enforce laws regulating extractive activities in the country to ensure safe environment; and also to raise tariff and non-tariff barriers on products that do not promote friendly environment and vice versa.
    Keywords: CO2 emission; energy consumption; Ghana; STIRPAT model; mining; natural resources
    JEL: O2 Q4 Q5
    Date: 2018–03–20
  6. By: Fadia Al Hajj (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Gilles Dufrenot (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Benjamin Keddad (PSB - Paris School of Business)
    Abstract: This paper discusses the theoretical choice of exchange rate anchors in Sub-Saharan African countries that are facing external vulnerabilities. To reduce instability, policymakers choose among promoting external competitiveness using a real anchor, lowering the burden of external debt using a nominal anchor or using a policy mix of both anchors. We observe that these countries tend to adopt mixed anchor policies. We solve a state space model to explain the determinants of and the strategy behind this policy. We find that the choice of policy mix is a two-step strategy: First, authorities choose the degree of nominal exchange rate flexibility according to the velocity of money, trade openness, foreign debt, degree of exchange rate pass-through and exchange rate target zone. Second, authorities seek to stabilize the real exchange rate depending on the degree of trade integration with the rest of world and the degree of foreign exchange interventions. We conclude with regime-switching estimations to provide empirical evidence of how these economic fundamentals influence exchange rate policy in Sub-Saharan Africa.
    Keywords: African countries, exchange rate policy, external vulnerabilities, regime-switching model
    JEL: C32 F31 O24
    Date: 2018–03
  7. By: Kodila-Tedika, Oasis; Asongu, Simplice
    Abstract: In this study, we show that historic events have a long term incidence on institutional development. Within the framework of the paper, we attempt to provide insights into a historical dimension that has not received the scholarly attention it deserves in empirical literature, notably: African resistance in the face of colonization. The main finding suggests that contemporary institutions in Africa are endogenous to historical trajectories adopted by countries in the continent. Countries that experienced high resistance to colonial domination are associated with better contemporary governance standards. The findings are robust to a multitude of tests, notably: changes in estimation techniques, accounting for outliers, transformation of the outcome variable, control for endogeneity and changes of the outcome variable.
    Keywords: Colonialism; Resistance; Domination; Africa, Institution
    JEL: N17 O55 P48
    Date: 2018–03–16
  8. By: Roger Nord; Wenjie Chen
    Abstract: How does China’s new growth model affect sub-Saharan Africa? To address this question, this paper first looks at the growing ties between China and Africa; attempts to estimate more precisely the impact on growth through the trade channel; and finally draws some policy implications regarding whether this means an end of the Africa Rising narrative or merely the beginning of a new chapter.
    Keywords: Economic growth;Trade;Trade policy;Trade relations;China, growth, sub-Saharan Africa, trade channel, Africa Rising
    Date: 2017–04–07

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