nep-afr New Economics Papers
on Africa
Issue of 2018‒04‒30
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Just peanuts? - Trump's protective tariffs and their impact on Africa By Kohnert, Dirk
  2. Exchange Rate Policy and External Vulnerabilities in Sub-Saharan Africa: Nominal, Real or Mixed Targeting? By Fadia Al Hajj; Gilles Dufrenot; Benjamin Keddad
  3. Stagnation of Integration in Aid Administration in South Africa―Choices Between Norms, Interests and Power Balance― By Hisahiro Kondo
  4. Revisiting Cross-Country Poverty Convergence in the Developing World with a Special Focus on Sub-Saharan Africa By Ouyang, Yusi; Shimeles, Abebe; Thorbecke, Erik
  5. Zimbabwe's Harmonized Cash Transfer Programme Improves Food Security and Reduces Reliance on Food Gifts By Garima Bhalla; UNICEF Office of Research - Innocenti
  6. Is the consumption-income ratio stationary in African countries? Evidence from new time series tests that allow for structural breaks By Solarin, Sakiru Adebola; Shahbaz, Muhammad; Stewart, Chris

  1. By: Kohnert, Dirk
    Abstract: The international discussion of Trump's dispute over import tariffs for steel, aluminum and even cars are so far focused on the big global players. However, smaller African countries in particular could suffer too from the planned punitive tariffs, analogous to the famous African proverb, "When elephants fight, it is the grass that suffers". Egypt and South Africa for example, the potentially most affected countries in Africa, face massive job losses and earning opportunities, with all the consequences that this entails for their already fragile economy and their population in dire poverty.
    Keywords: USA, tariffs, trade war, WTO, steel, aluminium, cars, Africa, Egypt, South Africa, China, EU,
    JEL: F13 F51 F52 H21 P16 P52
    Date: 2018–04–05
  2. By: Fadia Al Hajj (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Gilles Dufrenot (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); 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
    Date: 2018–03
  3. By: Hisahiro Kondo
    Abstract: Conventional literature, which analyzes potential factors to determine aid approaches, initially focused on donor interests rather than recipient needs. Recently, this analysis is being replaced with new understandings that emphasize the importance of identities and norms. Once aid actors internalize these concepts, these identities and norms can both help to determine approaches to aid. This paper argues that the intensity of both interests and identities/norms may differ between donors as well as within donors, and it can also take on a variety of roles at different times. Hence this paper focuses on the roles that both the interests and norms of stakeholders take in integrating aid administration. This paper analyses South Africa’s international aid approach, focusing on how and why the integration of its aid administration has stagnated. South Africa is not only a salient emerging aid donor individually but, at the regional level, is the only major donor on the African continent and, in a global sense, is the one member of BRICS from Africa. South Africa has been attempting to centralize and integrate its currently decentralized aid administration. Drawing on the sense of shared African identity fostered by the president, ruling party and foreign ministry, South Africa initially attempted to establish a centralized aid co-ordination mechanism—the South African Development Partnership Agency (SADPA). However, the process of establishing SADPA has been stymied due to a number of factors: the change of president, corruption allegations against one president, the subsequent weakening of leadership, criticism by opposition parties, the economic recession and budget austerity, consistent economic interest in regional integration, and the indifference of the media and taxpayers. The idea of an African identity, which puts considerable faith in solidarity with other African countries, is accepted in different ways by domestic actors, and support for it may rise or fall according to changeable political and economic situations. At this moment, arguments for the promotion of national interests in aid approaches are more common among aid-related workers than those for an African identity. Therefore, the relative power balance of actors is favorable to actors for South Africa’s domestic rather than external interests, causing the stagnation of integration of aid administration in South Africa. Therefore, it can be concluded that the integration of aid administration is a highly political process, although DAC recommends it be undertaken in a less politicized manner.
    Keywords: South Africa, aid administration, norms, identities, power balance
    Date: 2018–03
  4. By: Ouyang, Yusi (The University of Tulsa); Shimeles, Abebe (African Development Bank); Thorbecke, Erik (Cornell University)
    Abstract: The literature on poverty convergence is sparse and much of the empirical evidence relies on Ravallion (2012) who found a lack of poverty convergence across some ninety Less Developed Countries (LDCs) during 1977-2007. This paper revisits cross-country poverty convergence using data from the same sources but an extended period, i.e. 1977-2014. We find that while poverty convergence remains absent across LDCs during 1981-2014, it is explained by initial poverty nullifying the effectiveness of growth in reducing poverty; whereas an adverse direct effect of initial poverty on growth – which is recognized as the main impediment to cross-country poverty convergence during 1977-2007 – is not found. In SSA, in contrast, we find strong cross-country poverty convergence during both periods examined, as an adverse direct poverty effect is not found, and the indirect poverty effect is not large enough to cancel the mean convergence effect.
    Keywords: cross-country poverty convergence, growth, poverty, Sub-Saharan Africa
    JEL: O10 O55
    Date: 2018–03
  5. By: Garima Bhalla; UNICEF Office of Research - Innocenti
    Abstract: In 2016, approximately 815 million people were chronically undernourished globally. In recent years, food security has worsened in some parts of the world, including sub-Saharan Africa. In Zimbabwe, latest estimates show that about 45% of the total population are undernourished1. To address the challenge of growing food insecurity, effective social protection programmes must be implemented and scaled-up. Cash transfers are one such programme, the primary objectives of which often include poverty alleviation and food insecurity reduction. This research study utilized longitudinal data collected for the impact evaluation of Zimbabwe’s Harmonized Social Cash Transfer Programme (HSCT), an unconditional cash transfer that targets ultra- poor, labour-constrained households. It accomplishes two things: It provides evidence on the relative merits of using an aggregate consumption expenditure measure versus a food security scale, to assess household vulnerability and food insecurity; and it contributes to a growing literature on the effects of state-sponsored unconditional cash transfers in Africa on household behaviour and food security.
    Keywords: cash transfers; food security;
    Date: 2018
  6. By: Solarin, Sakiru Adebola (Faculty of Business Multimedia University Malaka); Shahbaz, Muhammad (Montpellier Business School); Stewart, Chris (Kingston University London)
    Abstract: This paper examines whether the consumption-income ratio is stationary in 50 African countries. We use the residual augmented least squares (RALS-LM) unit root test that allows for structural breaks developed by Meng et al. (2014). The empirical evidence shows that the consumption-income ratio is stationary around structural breaks in most (44 out of 50) African countries. This is consistent with the predictions of most economic theory. The general finding of mean reversion implies that (policy) shocks are likely to have only temporary effects on the consumption-income ratio in most African countries.
    Keywords: consumption-income ratio; African countries; unit root tests; structural breaks
    JEL: C22 E12 E21
    Date: 2018–04–24

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