nep-afr New Economics Papers
on Africa
Issue of 2023‒09‒18
five papers chosen by
Sam Sarpong, Xiamen University Malaysia Campus

  1. Investigating Volatility Transmissions among Sovereign Bonds in African and Emerging Markets Using Multivariate GARCH Models By Debalke, Negash Mulatu
  2. Behavioral drivers of intentions to use alternatives to cash: An African survey By David Peón
  3. The Effects of Exchange Rate Changes on Sudanese Output: An Asymmetric Analysis using the NARDL Model By Mesbah Fathy Sharaf; Abdelhalem Mahmoud Shahen
  4. Technology Evolution and Tax Compliance: Evidence from Rwanda By Hakizimana, Naphtal; Santoro, Fabrizio
  5. Digitalization and Disruptive Technologies in the Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA) Regions By Ahmed Farouk Ghoneim; Dina Atef Mandour

  1. By: Debalke, Negash Mulatu
    Abstract: The study examined volatility transmissions between Ethiopia and Ghana's sovereign bonds and emerging markets. Five Multivariate GARCH models were estimated using time series price indices. AIC and BIC criteria identified the VCC-MGARCH model as the best. The result shows own-volatility spillovers are higher than cross-volatility spillovers. In addition, it confirms cross-spillovers were unidirectional, from emerging markets to Ethiopia, with no significant spillover to Ghana. There is no bidirectional volatility spillover. Both Ethiopia and Ghana exhibit significant ARCH and GARCH effects, emphasizing the importance of addressing past variations and squared returns in volatility management. Significant adjustment parameters suggest that deviations from long-term equilibrium are corrected, indicating the markets’ stability mechanisms. Thus, policymakers should monitor these mechanisms for market stability. Finally, policy implications emphasize monitoring and managing external influences, addressing market dynamics persistence, and implementing policies to reduce excessive volatility.
    Keywords: Sovereign Bond; Ethiopia; Ghana; Africa; Emerging Markets; Return; Volatility; Spillover; M-GARCH.
    JEL: E58 E63 F65
    Date: 2023–08–22
  2. By: David Peón (Universidade da Coruna)
    Abstract: Seeking to identify frictions to the possible implementation of CBDCs, I explore potential behavioral drivers for people to use cash or alternative payment methods in retail transactions. I conducted an online survey targeting adults in sub-Saharan Africa, a continent characterized by lower levels of banking penetration, intensive use of cash, and popularity of mobile money accounts to overcome financial exclusion. I obtained robust evidence that the affect heuristic is the only relevant behavioral trait against the use of cash and of credit cards. This adds to criticisms of behavioral finance for frequently neglecting emotional drivers. Cognitive traits, such as mental accounting, fungibility bias, and habit do not mediate in the overall preference but in which contexts people prefer to use one payment method or another. I find no behavioral drivers against the use of electronic payments but robust evidence that higher per capita income reduces their preference. All results are robust to alternative econometric specifications: multinomial logistic, ordered logistic, and logit regressions. My research provides a clear message for policy making: authorities might better favor ensuring that a wide variety of payment alternatives are available for people to use, including cash, and let them choose.
    Date: 2023–08–20
  3. By: Mesbah Fathy Sharaf (Faculty of Arts, University of Alberta); Abdelhalem Mahmoud Shahen
    Abstract: This study tests the hypothesis that the real effective exchange rate changes have an asymmetric impact on the domestic output in Sudan from 1960 to 2020. The analysis uses a multivariate framework by controlling for the various channels through which exchange rate changes could affect domestic output. To disentangle the potential asymmetric impact of exchange rate changes on domestic income, we use the nonlinear autoregressive distributed lag (NARDL) framework of Shin et al. (2014) to separate real currency appreciations from depreciation. The results show that fiscal policy has no statistically significant effect on domestic output, while monetary policy has a statistically significant long-run contractionary effect. Results of the NARDL model show long-run asymmetry in the effect of real currency appreciations and depreciations. In particular, real currency appreciations (depreciations) have an expansionary (contractionary) effect on domestic output. There is a considerable difference in the magnitude of the effect of the positive exchange rate shocks compared to the negative shocks, in which the magnitude of the effect of the real currency appreciations on domestic output is almost double that of real currency deprecations. Monetary authorities in Sudan can use the real exchange rate as an effective instrument to affect domestic output in the long run.
    Date: 2023–07–20
  4. By: Hakizimana, Naphtal; Santoro, Fabrizio
    Abstract: Information technology (IT) has great potential to help increase taxpayer compliance and revenue collection. Despite the increasing use of IT solutions by African tax administrations, evidence on its effectiveness remains limited. In Rwanda, the Revenue Authority introduced a more advanced version of its electronic billing machines (EBM) to enhance its ability to track business transactions remotely and to improve taxpayers’ experience of using the machines. Using a wealth of administrative data collected by the Revenue Authority, this paper evaluates the impact of the adoption of EBM2 on the ways in which firms file their tax returns. In particular, we are able to compare first-time users of EBM2, who are mostly new taxpayers, with ‘shifters’, who moved from the old EBM1 to EBM2. We looked first at value added tax (VAT). Overall, the adoption of EBM2 resulted in significant increases in reported business turnover, non-taxable sales, taxable sales, VAT inputs and VAT due. There was also a reduction in the proportion of completed VAT returns that implied zero VAT liabilities. Unsurprisingly, there was no significant overall change in the VAT returns from ‘shifters’. They had probably internalised the benefits of electronic billing machines when using the earlier EBM1 version. The effects of the adoption of EBM2 on income tax returns are less positive. Overall, no increase in income tax liability is reported. These results suggest that taxpayers do not believe that the Revenue Authority will attempt to reconcile their (separate) VAT and income tax returns. Taxpayers probably provide more reliable VAT returns because they believe, on the basis of the installation of electronic billing machines, with upgrades, that the Revenue Authority is focusing more on VAT. The main policy implication is that the Revenue Authority should make more effort to reconcile firms’ separate VAT and income tax returns, so that the positive effects of the new electronic billing machines on VAT compliance will spillover into income tax compliance.
    Keywords: Finance, Technology,
    Date: 2023
  5. By: Ahmed Farouk Ghoneim (Cairo University); Dina Atef Mandour (Cairo University)
    Abstract: This paper aims at investigating the role of digitalization and the so-called disruptive technologies (DTs) in Middle East North Africa (MENA) and Sub-Saharan Africa (SSA) regions. It builds on a number of studies that have been devoted to investigate the impact of digitalization on individual countries in both regions, as well as a couple of regional reports. The paper tackles two main aspects of digitalization and DTs in MENA and SSA. The two main aspects are readiness(determinants of the sets of the two regions, MENA and SSA, to adopt new technologies), and the effects of adopting digitalization and DTs, or the lack thereof, on different aspects of the economies of both regions. The study pinpoints the gap between MENA and SSA, both in terms of readiness indicators, as well as effects. The study concludes that digitalization, so far, has limited positive impact on both SSA and MENA regions. The positive impact can be larger provided that the determinants or preconditions for allowing it to play this role are present. Such preconditions include the required infrastructure (both physical and data), the appropriate institutional and legal framework, the needed human capital, etc
    Date: 2023–04–20

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