nep-afr New Economics Papers
on Africa
Issue of 2021‒08‒23
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The Combined Effects of Managerial and Operational Performance of Various Fundamental Components on Stock Selection By Moh’d, Shamis Said; Ozgur, Ceyhun; Mohd, Mohd Yaziz; Khalfan, Mohamed Hafidh
  2. Remittances and the Future of African Economies By Ibrahim A. Adekunle; Sheriffdeen A. Tella
  3. Foreign Direct Investment and Domestic Private Investment in Sub-Saharan African Countries: Crowding-In or Out ? By Askandarou Diallo,; Jacolin Luc,; Isabelle Rabaud.
  4. On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance By Ibrahim A. Adekunle; Olumuyiwa G. Yinusa; Tolulope O. Williams; Rahmon A. Folami
  5. More Security, More Legitimacy? Effective Governance as a Source of State Legitimacy in Liberia By Nomikos, William George
  6. Long Run Effects of Aid: Forecasts and Evidence from Sierra Leone By Katherine Casey; Rachel Glennerster; Edward Miguel; Maarten J. Voors
  7. Between Hope and Despair: Egypt's Revolution and Migration Intentions By Yvonne Giesing; Reem Hassan
  8. Financial Integration and Growth Outcomes in Africa: Experience of the Trade Blocs By Ibrahim A. Adekunle; Abayomi T. Onanuga; Ibrahim A. Odusanya

  1. By: Moh’d, Shamis Said; Ozgur, Ceyhun; Mohd, Mohd Yaziz; Khalfan, Mohamed Hafidh
    Abstract: This study aims at quantifying fundamental components such as the country economy, stock market development, economic sectors, and company’s performance computed by Data Envelopment Analysis (DEA) built-in MATLAB program and combined using a top-down approach. It was conducted in the East African region specifically Kenya, Tanzania, Uganda, and Rwanda from 2015 to 2018. A secondary data extracted from the listed company’s websites, capital market authorities of each country, and World Bank. The study found that the combined performance of various components has a great impact on screening the stocks to be used for portfolio construction. It gives a signal to the authorities of capital markets, investors, policymakers, and other regulatory bodies to take immediate measures on designing policies and best practices. Further recommendation to the capital market authorities within the region is to ensure the growth of managerial and operational performance of stock exchanges. Also, regulatory bodies, policymakers, and higher-level administration of each country within the region to take responsibility to uplift the country's economy as well as economic sectors growth. The board of directors and management of listed companies should formulate strategies to improve both managerial and operational performance.
    Date: 2021–07–11
  2. By: Ibrahim A. Adekunle (Babcock University, Nigeria); Sheriffdeen A. Tella (Olabisi Onabanjo University, Ago-Iwoye, Nigeria)
    Abstract: African nations have in time, passed over-relied on remittances inflow to augment domestic finances needed for growth. Despite the volume and magnitude of remittances that have to serve as an alternative source of investment financing, African remains mostly underdeveloped. The altruistic motives of sending remittances to Africa are likely to fade with time. In this study, we argued that the altruistic connection that has been the bedrock of sending money to African countries would eventually fade when the older generation passes away. To lean empirical credence to this assertion, we examine the structural linkages and the channels through which remittances predicts variations in financial developmentas a threshold for gauging the future of African economies. We gathered panel data on indices of remittances and financial development for thirty (30) African countries from 2003 through 2017. We employed the dynamic panel system generalised method of moment (dynamic system GMM) estimation procedure to establish a baseline level relationship between the variables of interest. We adjusted for heterogeneity assumptions inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Findings revealed that a percentage increase in remittances inflow has a short-run, positive relationship with financial development in Africa. The result further revealed that the exchange rate negatively influences financial development in Africa. Based on the findings, it is suggested that, while attracting migrants' transfers which can have significant short-run poverty-alleviating advantages, in the long run, it might be more beneficial for African governments to foster financial sector development using alternative financial development strategies in anticipation of a flow of remittance that will eventually dry up.
    Keywords: Remittance; Financial Development; African Economies; System GMM; Africa
    JEL: F37 G21
    Date: 2021–01
  3. By: Askandarou Diallo,; Jacolin Luc,; Isabelle Rabaud.
    Abstract: This paper investigates the relationship between FDI and private investment in Sub-Saharan Africa (SSA), using a sample of 40 countries over 1980-2017. To disentangle short term from long-term dynamics, our empirical analysis is based on Pooled Mean Group (PMG), Mean Group (MG) and Dynamic Full Effects (DFE) models. We find that FDI has little effect on private investment in the short run but significant crowding-in effects in the long-run: a one percentage point increase of the share of FDI in GDP leads to a 0.29% rise in private investment, in the long run. Our results also show that FDI interacts with public domestic investment to boost these positive effects. Finally, we show that the impact of FDI on domestic private investment is stronger in non-natural resource exporting diversified countries as opposed to non-diversified commodity exporters.
    Keywords: Financial Development, Domestic Investment, FDI, Crowding-in/Crowding-out Effects.
    JEL: G11 O11 O16
    Date: 2021
  4. By: Ibrahim A. Adekunle (Babcock University, Nigeria); Olumuyiwa G. Yinusa (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Tolulope O. Williams (Olabisi Onabanjo University, Ogun State, Nigeria); Rahmon A. Folami (Olabisi Onabanjo University, Ogun State, Nigeria)
    Abstract: While it is clear that financial depth and economic diversity are prerequisites for the realisation of growth and development objectives, heterogeneous factors that determines financial development remains imperfectly understood. This ambiguity in the structural relations between varied causative factors is more pronounced in Africa where conditions for growth and development remains inadequately met. Underexplored aspects such as geographic, political, economic and macroeconomic policy determinant of financial development in Africa could have culminated into the misalignment of the continent financialisation strategies. This paper takes the lead, diverse and holistic approach to assign numerical weights to these unobserved factors to reach conclusions that can redefine policy and research on Africa's financialisation objectives. We compared result along with the mean group (MG), common correlated effect mean group (CCEMG) and Augmented Mean Group (AMG) estimators but relied on the AMG results because of its high precision, relevance and superiority in addressing core issues of cross-sectional dependence and slope homogeneity of regressors.Based on the AMG results, we found geographic, economic and macroeconomic policy factors to lead to financial development in Africa. However, our political/institutional composite index inversely relate to financial development in Africa. This counter-intuitive outcome could be due to Africa, age-long weak institutional capacities. Policy implications were discussed.
    Keywords: Financial Development; Geography; Institutions; Macroeconomic Policy; Africa
    JEL: D02 G20 P34 Q56
    Date: 2021–01
  5. By: Nomikos, William George
    Abstract: What explains the legitimacy of state institutions in areas of limited statehood? In order to ensure effective governance, it is critical for states with limited capacities to establish the legitimacy of state authority. Yet, the sources of institutional legitimacy are not well understood in areas of limited statehood where legitimacy is often the only mechanism for the state to ensure compliance and cooperation of citizens. This article argues that in areas of limited statehood a state’s legitimacy among the domestic population crucially depends on whether that population feels safe and secure. We test this argument with an original survey fielded with 2,000 respondents from Liberia using multilevel modelling. Our results demonstrate that security perceptions of the population play a key role in strengthening state legitimacy at both the community and county level. We also find that explicit attribution of security to specific institutions is key for linking more effective governance with more legitimacy. However, security alone is not enough to acquire state legitimacy. Our analysis also reveals that states gain legitimacy when locals perceive institutions as just and elections as free and fair in addition to feeling secure. The results demonstrate that the sources of state legitimacy are multifaceted and that the provision of security is an important component thereof. Thereby, our study speaks to lates theoretical debates on the various sources of state legitimacy and contributes novel empirical evidence.
    Date: 2021–08–10
  6. By: Katherine Casey; Rachel Glennerster; Edward Miguel; Maarten J. Voors
    Abstract: We evaluate the long-run effects of a decentralized approach to economic development, called community driven development (CDD), a prominent strategy for delivering foreign aid. Notably we revisit a randomized CDD program in Sierra Leone 11 years after launch. We estimate large persistent gains in local public goods and market activity, and modest positive effects on institutions. There is suggestive evidence that CDD slightly improved communities’ response to the 2014 Ebola epidemic. We compare estimates to the forecasts of experts from Sierra Leone and abroad, working in policy and academia, and find that local policymakers are overly optimistic about CDD’s effectiveness.
    JEL: H41 I25
    Date: 2021–07
  7. By: Yvonne Giesing; Reem Hassan
    Abstract: We study the effect of the 2011 Egyptian revolution and its aftermath on migration intentions of the Egyptian youth. We measure revolution intensity using the spacial variation in the number of deaths during the revolution from the Statistical Database of the Egyptian Revolution Wikithawra and combine it with data on migration intentions from the Harmonized Survey of Young People in Egypt (HSYPE). Difference-in-difference estimations show that the revolution significantly decreased the migration intentions of youth, especially young men. Single women did not change their migration intentions, mainly due to their financial dependence. Results also show that the youth living in informal slum areas experienced stronger effects. We describe two opposing channels: the insecurity channel, which positively affects migration intentions, and the optimism channel, which negatively affects migration intentions by inducing hope in a better Egyptian future. Youth in rural and slum areas were more sensitive to the optimism channel, due to their higher threshold of insecurity perception.
    Keywords: political instability, migration, Egypt, revolution
    JEL: D74 F22 O15 P16
    Date: 2021
  8. By: Ibrahim A. Adekunle (Babcock University, Nigeria); Abayomi T. Onanuga (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Ibrahim A. Odusanya (Olabisi Onabanjo University, Ogun State, Nigeria)
    Abstract: In this study, we examine the benefits of financial integrations in four of Africa regional trade blocs: COMESA, ECCAS, CEN-SAD and ECOWAS. We regress de-jure and de-facto indices of financial integration on growth outcome using the dynamic system generalised method of moment and pooled mean group estimation procedure. Findings revealed that total foreign asset and liabilities and foreign liabilities as a percentage of GDP are inversely related to growth outcomes in COMESA. In CEN-SAD, we found that foreign liabilities as a percentage of GDP hurts growth. In ECCAS, growth-financial integration relationship showed that foreign liabilities as a percentage of GDP inhibit real per capita GDP in the long run. In ECOWAS, foreign liabilities as a percentage of GDP is inversely related to real per capita GDP in the long run. Policy implications of our findings were discussed.
    Keywords: Financial Integration; Economic Growth; system GMM; Pooled Mean Group; Regional Trade Bloc; Africa
    JEL: F36 F43 O47
    Date: 2021–01

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