nep-afr New Economics Papers
on Africa
Issue of 2022‒06‒13
six papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. Corporate Finance, Industrial Performance and Environment in Africa: Lessons for Policy By Ekundayo P. Mesagan; Titilope C. Adewuyi; Olugbenga Olaoye
  2. E-Money and Deposit Insurance in Kenya By Bert Van Roosebeke; Ryan Defina; Paul Manga
  3. Spatial Effects of Foreign Direct Investment Flows on Industrial Performance in Sub-Saharan African Countries By Kirsi Zongo; Mahamadou Diarra
  4. The Implication of Exchange Rate Volatility on Nigeria’s External Reserves: 1980-2020 By Soro, Garbobiya Tuwe; Aras, Osman Nuri
  5. Remittances and Income Inequality in Africa: Financial Development Thresholds for Economic Policy By Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A.; Nkrumah, Richard K.
  6. Terrorism, Media Coverage and Education: Evidence from Al-Shabaab Attacks in Kenya By Alfano, Marco; Goerlach, Joseph-Simon

  1. By: Ekundayo P. Mesagan (Pan Atlantic University, Lagos, Nigeria.); Titilope C. Adewuyi (University of Lagos, Lagos, Nigeria.); Olugbenga Olaoye (Bells University of Technology, Nigeria)
    Abstract: This study employs the Pool Mean Group framework to investigate the impact of corporate finance and industrial performance on pollution in Africa between 1990 and 2020. The study, which focuses on 36 African nations, found that corporate financing insignificantly enhances environmental quality in the short run, while it significantly worsens the environment in the long run. Also, the result shows that industrial performance exerts a negative but insignificant impact on pollution in both the short- and long-run periods. Lastly, the interaction term between corporate finance and industrial performance has a negative and significant impact on pollution in both periods. With this striking result, the study recommends that efforts should be made to promote the growth of environmentally sound production plants in the continent through the removal of credit facilitation bottlenecks.
    Keywords: Corporate Finance, Industrial Performance, Pollution, Africa
    JEL: G3 L25 O14 Q53
    Date: 2022–01
  2. By: Bert Van Roosebeke (International Association of Deposit Insurers); Ryan Defina (International Association of Deposit Insurers); Paul Manga (Kenya Deposit Insurance Corporation)
    Abstract: E-money is widespread in Kenya, especially through MPESA, a form of e-money stored on mobile phones and issued by Safaricom, a mobile network operator (MNO). Integration between the MPESA platform and the traditional banking system is increasing. Given the very high use-grade of MPESA throughout the population, it has reached critical importance in Kenya. In Kenya, e-money issuers must back their e-value with bank balances at commercial banks (float), through trust accounts. Deposit insurance does not cover a default of the e-money issuer. However, the Kenya Deposit Insurance Corporation aims at offering pass-through coverage in case of a default of the deposit-taking commercial bank holding the trust accounts. Pass-through coverage is confronted with a number of challenges, including regarding data on the identity of e-money users and their balances held. Also, the critical importance of MPESA raises questions as to how to deal with a potential default of the MNO and the role of deposit insurance in such a scenario. Looking forward, there is merit in further coordination amongst safety net participants as well as in the management of trust accounts and the strengthening of data-availability requirements to e-money issuers.
    Keywords: deposit insurance, bank resolution
    JEL: G21 G33
    Date: 2021–12
  3. By: Kirsi Zongo (Université Norbert ZONGO de Koudougou); Mahamadou Diarra (Université Norbert ZONGO de Koudougou)
    Abstract: This paper rigorously analyzes the effects of foreign direct investment inflows on the industrial performance in the Sub-Saharan African (SSA) economies. Applying the Durbin spatial method (SDM) on a two-sector model to account for spatial effects, the empirical results show that the higher the capacity of SSA countries to attract foreign investments, the higher is the job-inducing effect and value-added created in the industrial sector, while no technology transfer was induced. This finding highlights the importance for the countries of sub-Saharan Africa to direct foreign direct investment towards strategic sectors where they benefit from comparative advantages and improve the business climate to attract more FDI, a pledge of any industrial development.
    Keywords: Spatial Econometrics,Industrial Performance,Foreign Direct Investment
    Date: 2022–03–23
  4. By: Soro, Garbobiya Tuwe; Aras, Osman Nuri
    Abstract: Given the volatile nature of the exchange rate in Nigeria and the dynamics in the external reserves of the nation which are kept in foreign currency (dollar), this paper examined the impact of exchange rate shocks on the Nigerian external reserves using annual data from 1980 to 2019. Employing the Autoregressive Distributed Lag model, the results of the study indicates that exchange rate has an asymmetric impact on reserves, suggesting that the partial sum of exchange rate differ in magnitude and size relative to reserves in both positive and negative direction. The impact of a positive shock in exchange rate on reserves is statistically significant while the effect of a negative shock in exchange on reserve is statistically insignificant in the long-run. The same relationship holds for the short-run effect, although, both the positive and the negative short-run effects are statistically insignificant. The study therefore recommends that monetary authority should strengthens the exchange rate by adopting a flexible exchange floating and making it to thrives in order to boost reserves. Some of these policies could include allowing the market forces to determine the exchange rate and harmonizing the exchange rate position of the country.
    Keywords: Exchange Rate, External Reserves, Non-Linear Autoregressive Distributed Lag Model, Nigeria.
    JEL: F31
    Date: 2021–05–01
  5. By: Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A.; Nkrumah, Richard K.
    Abstract: The study employs macrodata on 42 African countries to examine whether remittances and financial development (including the sub-components of access, depth and efficiency) contribute to the equalisation of incomes across the continent. Robust evidence from the dynamic GMM estimator shows that: (i) remittances heighten income inequality in Africa, (ii) Africa’s financial system is not potent enough for repacking remittances towards the equalisation of incomes, and (iii) vis-à-vis financial access and depth, inefficiencies characterising Africa’s financial institution is the main reason remittances contribute to the widening of the income disparity gap. Nonetheless, the optimism which we provide by way of threshold analysis shows that channelling efforts into the development of Africa’s financial sector could yield shared income distribution dividends. In particular, efforts should be made to achieve a minimum of 23.05 per cent of financial access, and 3.02 per cent for that of efficiency of financial institutions if Africa’s financial sector is to repackage external finance towards the equalisation of incomes. A few policy recommendations are provided in the end.
    Keywords: Africa,Financial Development,Financial Sector Efficiency,Income Inequality,Remittances
    JEL: F22 F24 G21 I3 N37 O11 O55
    Date: 2022
  6. By: Alfano, Marco (University of Strathclyde); Goerlach, Joseph-Simon (Bocconi University)
    Abstract: We examine how terrorism alters the demand for education through perceived risks and returns by relating terrorist attacks to media signal coverage and schooling in Kenya. Exploiting geographical and temporal variation in wireless signal coverage and attacks, we establish that media access reinforces negative effects of terrorism on schooling. These effects are confirmed when we instrument both media signal and the incidence of attacks. For households with media access, we also find a significant relation between media content and schooling and a significant effect of attacks on self-reported fears and concerns. Based on these insights, we estimate a simple structural model where heterogeneous households experiencing terrorism form beliefs about risks and returns to education. We exploit the same quasi-experimental variation as in the reduced form analysis to identify how media change subjective expectations. The results show that households with media access significantly over-estimate fatality risks.
    Keywords: terrorism, media, expectations, education
    JEL: D74 L82 F52 I21
    Date: 2022–05

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