nep-afr New Economics Papers
on Africa
Issue of 2022‒05‒30
five papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. Are the East African Community's Countries Ready for a Common Currency? By Kigabo-Rusuhuzwa, Thomas; Heshmati, Almas
  2. The impact of Microfinance Institutions on the Informal Economy in Nigeria By Osuagwu, Eze Simpson; Hsu, Sara; Adesola, Ololade
  3. The Chinese Influence in Africa: Neocolonialism or Genuine Cooperation? By Vicini, Andrea; Ventroni, Matteo; Vicini, Matteo
  4. Testing for the purchasing power parity (PPP) hypothesis between South Africa and its main trading partners: application of the quantile approach By Hendriks, Johannes Jurgens; Bonga-Bonga, Lumengo
  5. Corruption in Customs By Cyril Chalendard; Ana Margarida Fernandes; Gael Raballand; Bob Rijkers

  1. By: Kigabo-Rusuhuzwa, Thomas (University of Rwanda); Heshmati, Almas (Jönköping University, Sogang University)
    Abstract: This paper investigates the East African Community (EAC) partner states' readiness for a common currency. It uses recent data to assess the impact of policy coordination in the region during the last seven years of East African Monetary Union's protocol implementation. Despite some similarities in the structures of EAC economies, EAC member states remain susceptible to asymmetric shocks. Inflation is in the process of converging in EAC, but the speed of convergence is slow. Time is needed for preparing and for harmonizing policy before adopting the common currency. Adopting a common currency will lead to considerable costs for EAC countries.
    Keywords: East African Community, monetary union, common currency, policy harmonization, convergence, regional integration
    JEL: E42 F33 N17 O23
    Date: 2022–04
  2. By: Osuagwu, Eze Simpson; Hsu, Sara; Adesola, Ololade
    Abstract: This paper investigates the impact of microfinance institutions on the informal sector of the Nigeran economy drawing from a cross-sectional data of 14,189 customers from two major microfinance clusters – the Self-Reliance Economic Advancement Programme (SEAP) and ASHA Microfinance Bank Limited with a combined membership of over 700,000 clients. The study applies a descriptive and fully modified ordinary least square (FMOLS) model to evaluate the statistical relationship on average monthly borrowing amount and explanatory variables of factors that could affect the ability of clients to seek support from the various microfinance institutions. Empirical evidence suggests that amount of money borrowed by clients is significantly affected by the nature of business; whether the business is operating in the formal or informal sector, gender of the entrepreneur, and on the other hand whether the degree of borrowing is strongly affected by monthly household expenses of borrowers. The paper therefore concludes that the informal sector is largely supported by micro finance institutions but seeks a policy redirection for government to take steps to formalize the large stream of informal borrowers in order to improve domestic resource mobilization and actualize sustainable development of the Nigerian economy.
    Keywords: Microfinance, Informal Economy, Domestic Resource Mobilization, Sustainable Development, Nigeria
    JEL: D1 D14
    Date: 2021–06
  3. By: Vicini, Andrea; Ventroni, Matteo; Vicini, Matteo
    Abstract: The scope of the paper provides a different view than the current debate that tracks the historical trajectory of the relationship between China and Africa. The widely discussed economic influence of China in Africa comes from the end of WWII and has not been built in the last decade, as has been recently reported in many parts of the press. To understand this international relationship, it is important to put the events in the right historical perspective. This aspect is particularly true for a nation like China, which has a long-term vision for its diplomacy with respect to Western countries. However, the main economic and political connections between China and Africa and their mutual influences are examined in detail
    Keywords: China, Africa, international relations, economics, underdevelopment, diplomacy.
    JEL: F2 F5 F54
    Date: 2022–04
  4. By: Hendriks, Johannes Jurgens; Bonga-Bonga, Lumengo
    Abstract: This paper tests whether the PPP theory holds between trading partners, depending on the volume of trade and trade friction, such as exchange control. The test is applied between South Africa, a country that applies an exchange control policy, and its trading partners. The paper uses the quantile unit root test and quantile cointegration regression approach to test for the strong and weak-form PPP hypothesis. Strong evidence of the weak-form PPP hypothesis is found for high export countries over all quantiles. Specifically, weak-form PPP is found in China, the United States, Japan and the United Kingdom, whereas evidence of PPP, in general, was found to be lacking. The paper finds evidence that PPP is more likely to exist between countries with more significant trade volumes.
    Keywords: purchasing power parity, quantile, exchange rates
    JEL: C22 F31
    Date: 2022–05–01
  5. By: Cyril Chalendard; Ana Margarida Fernandes; Gael Raballand; Bob Rijkers
    Abstract: This paper presents a new methodology to detect corruption in customs and applies it to Madagascar’s main port. Manipulation of assignment of import declarations to inspectors is identified by measuring deviations from random assignment prescribed by official rules. Deviant declarations are more at risk of tax evasion, yet less likely to be deemed fraudulent by inspectors, who also clear them faster. An intervention in which inspector assignment was delegated to a third party validates the approach, but also triggered a novel manifestation of manipulation that rejuvenated systemic corruption. Tax revenue losses associated with the corruption scheme are approximately 3 percent of total taxes collected and highly concentrated among a select few inspectors and brokers.
    Keywords: corruption, tax enforcement, tariff evasion, trade policy
    JEL: F13 D73 H26
    Date: 2021

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