nep-afr New Economics Papers
on Africa
Issue of 2021‒02‒08
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The Journey towards Dollarization: The Role of the Tourism Industry By Ibrahim D. Raheem; Kazeem B. Ajide
  2. A tale of paper and gold: the material history money in South Africa By Feingold, Ellen; Fourie, Johan; Gardner, Leigh
  3. Does the Introduction of Stock Exchange Markets BoostEconomic Growth in African Countries? By António Afonso; Max Reimers
  4. Currency Union as a Panacea for ills in Africa: A New Institutional Framework and Theoretical Consideration By Abban, Stanley
  5. The banking sector and national economy By Uddin, Godwin; Ashogbon, Festus; Martins, Bolaji; Momoh, Omowumi; Agbonrofo, Hope; Alika, Samson; Oserei, Kingsley
  6. Nomadic Pastoralism, Climate Change, and Conflict in Africa By Eoin F. McGuirk; Nathan Nunn
  7. Globalization and conflicts: the good, the bad and the ugly of corporations in Africa By Sonno, Tommaso
  8. Heterogeneity in Migration Responses to Climate Shocks: Evidence from Madagascar By Marchetta, Francesca; Sahn, David E.; Tiberti, Luca; Dufour, Johany

  1. By: Ibrahim D. Raheem (ILMA University, Karachi, Pakistan); Kazeem B. Ajide (University of Lagos, Lagos, Nigeria)
    Abstract: There has been an increasing wave of globalization since the turn of the millennium. This study focuses on two by-products of globalization: dollarization and tourism. Empirical studies have ignored the possible relationship between dollarization and tourism. However, we hypothesize that a booming tourism industry will fuel increase in the usage and circulation of foreign currencies. The objective of this study is to examine the extent to which the tourism industry exacerbates the dollarization process of selected Sub-sahara African (SSA) countries. Using Tobit regression, we found that tourism positively affects dollarization. This result is robust to: (i) alternative measures of tourism; (ii) accounting for endogeneity and outlier effects.
    Keywords: Dollarization, Tourism, Sub-saharan Africa
    JEL: C11 E41 F31
    Date: 2021–01
  2. By: Feingold, Ellen; Fourie, Johan; Gardner, Leigh
    Abstract: This paper uses the South African objects in the National Numismatic Collection of the Smithsonian to tell a new material history of money in South Africa. In other parts of the continent, research about the currencies in use and how these changed over time have offered a new perspective on the impact of colonialism, commercialisation, and the rise of state capacity. South Africa, and southern Africa more generally, has remained on the periphery of these debates. This paper begins to fill this gap. It shows that even in Africa’s most financially developed region, the process of establishing a stable national currency was long and halting, reflecting struggles over South Africa’s relationship with the global economy and the rise and fall of apartheid.
    Keywords: South Africa; currency; colonialism; mineral; REF Impact Fund
    JEL: N47 N17
    Date: 2021–01
  3. By: António Afonso; Max Reimers
    Abstract: We assess whether the introduction of private equity capital markets effects economic growth in African countries. We address this issue by focussing on stock exchange markets as the predominant type of new equity markets,using a Diff-in-Diffregressionmethod.The analysis uses a panel data set from48 Sub-Saharan countries over the time range of 1970-2018.23 countries are part of the “treated” group–which introduced international stock exchanges–and 25 “untreated” countries serve as the control group. Our results show that when compared with the time period priortothe introduction of stock exchange markets, GDP per capita rises by the amount of 532US$ (around 40% of the Sub-Saharan average) after theintroduction of equity capital markets inthe treated countries.Overthe tenyears post introduction, the effect is hump-shaped, with effects becoming statistically significant from the first year after implementation, with a peak in Year 5, and it then becomes statistically insignificant from then onwards.
    JEL: C32 G15 N17
    Date: 2021–01
  4. By: Abban, Stanley
    Abstract: Currency union feasibility is the major topic of discourse in most developing economies especially based on the Optimal Currency Area theory. Given this, developing countries have peculiar characteristics that favour the feasibility of forming a currency union that is not accounted for based on the OCA criteria. Also, Currency union is viewed as a panacea for curing ills in struggling economies when the appropriate institutional setting is laid out. Given this, the study showed the channels to which currency union curb ills and suggests an institutional framework to consolidate the gains from trade. The study further argues the need for a new theory to evaluate currency union feasibility hence suggest an intuition ‘Optimal Cost Phase’ as a measure for currency union feasibility which can apply to both developing and developed countries. The study concludes that there is a need for a new institutional framework to ensure transparency and the realization of the policy on a common currency.
    Keywords: Currency Union, Optimal Currency Area (OCA), Optimal Cost Phase (OCP), institutions, common currency
    JEL: E6 F1 F4 F45
    Date: 2020–12–11
  5. By: Uddin, Godwin; Ashogbon, Festus; Martins, Bolaji; Momoh, Omowumi; Agbonrofo, Hope; Alika, Samson; Oserei, Kingsley
    Abstract: The banks are central elements of a market economy. In more than one way, they facilitate business transactions by acting as depositor and lender for many actors in the domestic and international economy. The banking industry in Nigeria has expanded in size in terms of assets in the last 60 years since the country’s independence from British colonial rule and undergone large-scale reforms vis a vis transformation in the global economy. What are the dimensions of this growth? How has it affected market efficiency and economic wellbeing of the people? This article provides answers to these questions and argue that growth has indeed happened in the banking sector by a quantification of liquid assets, investment securities and loans. It also captured its transnational dimension and how that has boosted international transactions as well as repatriation of Diaspora transfers to the national economy. This article also focused on the contradictions of the economy arising from inconsistent policies of government and meddlesomeness of global financial institutions, and their impact on the banking sector. This article ends on a prescriptive note by suggesting ways to make the banking sector more relevant in promoting productive activities in the national economy.
    Keywords: Banks , Banking , Asset , Currency , Economy , Nigeria
    JEL: E0 E02 E4 E5 E50 E58 E6 G0 O1 O10
    Date: 2021–01–21
  6. By: Eoin F. McGuirk; Nathan Nunn
    Abstract: Arid regions of Africa are expanding by thousands of square kilometers a year, potentially disturbing pastoral routes that have been forged over a long period of time. This disturbance is often said to explain why “herder-farmer” conflicts have erupted in recent years, as pastoralists and agriculturalists compete for increasingly scarce resources. We examine this hypothesis by combining ecological and ethnographic data on the location of pastoral ethnic groups with grid-cell level data on violent conflict in Africa from 1989 to 2018. First, using ecological data, (i) we confirm that areas suited to both agriculture and pastoralism are particularly prone to conflict relative to either agricultural or pastoral areas alone; and (ii) we find that the effect of precipitation shocks on conflict in these agro-pastoral zones is negative at the country-level, but not at the cell-level. To explain this pattern, we compile data on the historical location of borders between both types of ethnic groups. We find that droughts in pastoral areas lead to conflict in neighboring agricultural areas. This spillover mechanism appears to explain much of the negative overall relationship between precipitation and conflict in the sample. It implies that agro-pastoral conflict is caused by the displacement of pastoral groups due to low precipitation in their homelands. This finding establishes one mechanism through which climate change can lead to more conflict in agro-pastoral zones.
    JEL: N10 Q54 Z1
    Date: 2020–12
  7. By: Sonno, Tommaso
    Abstract: Using georeferenced data on the affiliates and headquarters of multinational enterprises together with georeferenced conflict data, this work is the first to establish a causal link between the activities of multinational enterprises and violence. The results indicate that activities which increase local human capital, such as education and health, decrease the probability of civil conflict, while the activity of sectors intense in scarce resources, in particular forestry, increases conflict. The increase in the likelihood of conflict is amplified especially in areas where the leading ethnic groups can place the burden of land deals on unrepresented groups.
    Keywords: multinationals; civil conflict; FDI; ethnic minority
    JEL: C23 D74 F23 L70 O13
    Date: 2020–01
  8. By: Marchetta, Francesca (CERDI, University of Auvergne); Sahn, David E. (Cornell University); Tiberti, Luca (Partnership for Economic Policy (pep)); Dufour, Johany (Université Laval)
    Abstract: We analyze the impact of climate events on migration among a cohort of young adults residing in rural Madagascar. We find a strong negative impact of drought on the decision of youth to migrate in the year after the adverse weather shock. Household assets and access to savings institutions attenuate this impact, consistent with the notion that wealth and savings cushion the blow of the shock on the resources required to finance migration. We also find that households that report more social connections outside their villages are more likely to have their young adult members migrate. Our findings suggest that the liquidity constraints from climate shocks that prevent youth migration are more binding for young women who migrate largely for reasons of marriage and education. Males, in contrast, are more likely to migrate in search of employment, which often has higher economic returns than migration motivated by marriage and education. These factors likely explain why drought deters migration of young women, but not so for young men who still choose to migrate in search of a job.
    Keywords: climate shocks, Madagascar, youth migration, internal migration
    JEL: O15 J13 N3 N57
    Date: 2021–01

This nep-afr issue is ©2021 by Sam Sarpong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.