Macro Economics
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- ItemNatural Resources and Economic Growth in Sub-Saharan Africa: Does Corruption Matter?(2022-04-01) Tsopmo, Pierre Christian; Messy, Martin AmbassaThe existing literature on the relationship between natural resources (NRs) and growth is inconclusive. To enrich this debate, some studies have investigated the role of institutions in the NRs-growth nexus. Unlike most previous work, which mostly considers the interactive effect of institutions, notably corruption, on the relation between NRs and growth, this paper determines the optimal threshold of corruption below and above which NRs affect economic growth differently. The aim of this paper is to investigate the effect of NRs on economic growth conditioned by the level of corruption in SSA. Using a panel data on 26 Sub-Saharan Africa (SSA) countries over the period of 1985 to 2014, this paper uses the Panel Smooth Transition Regression (PSTR) model developed by Gonzalez et al. (2005). Firstly, we found evidence of the existence of corruption thresholds that change the effect of NRs on economic growth. These thresholds are 0.94, 0.40, 2.33, 1.16 and 0.48 for public, executive, legislative, judicial and political corruption, respectively. Secondly, the relation between NRs and economic growth below and above each type of corruption gives mixed results. The sensitivity analysis, which led to the decomposition of NRs into forest and oil resources, confirms the divergence of the results found by the baseline specification. These results have significant implications for policy sequencing in SSA. To benefit from NRs-led growth, improvement of the institutional framework, including different political corruption reducing, should precede NRs management policies. Also, a certain diversification of the economies of SSA countries leads to a better efficiency of the NRs on economic activity.
- ItemMacroeconomic Determinants of Remittance Flows to Sub-Saharan Africa(African Economic Research consortium, 2021-01-20) Adenutsi, Deodat E.; Ahortor, Christian R. K.The fundamental objective of this study is to empirically explore the macroeconomic factors that explain variations in migrant remittance inflows to Sub-Saharan Africa (SSA). In doing this, the paper sampled 38 out of 48 SSA countries for which consistent balanced panel data can be constructed for the period 2000-2009. The Blundell-Bond system GMM dynamic panel data analytical framework was adopted. The results show that migrant remittances are largely driven by altruism, a signal that the sub-region has not been able to attract more ‘self-interest remittances’, probably due to unattractive investment climate arising out of implementation of unsound macroeconomic policies. The key macroeconomic determinants of remittance flows, measured as a percentage of GDP, are home-country income, host-country income, income differential, inflation, real interest rate differential, real exchange rate depreciation, private sector credit, institutional quality and remittance inflows inertia. While remittance inertia, host-country income, income differential, inflation, institutional quality, interest rate differential and real exchange rate depreciation have consistent positive individual impacts on remittance inflows, home-country income and private sector credit have negative effects on remittances. This study, thus, recommends that to attract optimal remittances – remittances that are in excess of altruistic motive – to SSA, there is need to ensure macroeconomic stability and pro-growth policies, and strategic fiscal, monetary and exchange rate policy reforms in SSA.
- ItemMacroeconomic and distributional consequences of energy supply shocks in Nigeria(African Economic Research consortium, 2006-11-04) Adenikinju, Adeola F.; Falobi, NiyiIn spite of its vast oil endowments, Nigeria continues to experience sporadic domestic oil supply shortages. These oil shortages manifest in regular queues at fuel stations that are often empty and in thriving parallel markets that sprout all over the country. The shortages have resulted in huge economic and non-economic costs to the economy. This study investigates the causes of the shortages and provides quantitative estimates of the economic costs to the Nigerian economy using a survey and a computable general equilibrium (CGE) model. The findings from this study show very clearly that oil sector supply shocks are costly both directly and indirectly. Oil supply shocks result in lower real GDP, higher average prices and greater balance of payment deficits. Other macroeconomic variables such as private consumption, investment, government revenue and employment also decline. In addition, the distributional impact of the quantitative energy supply shocks is higher for poor households than rich households. We also find that the sectoral impacts are mixed, often depending on the oil intensity of the sector. Finally, our survey results show that many economic agents on the demand side are willing to pay higher prices if that will guarantee a stable oil supply. Few players in the market chain benefit from supply disruptions, while consumers and the poor bear the main burden of these shocks.
- ItemMacroeconomic Convergence in Southern Africa Development Community(African Economic Research consortium, 2016-09-30) Simwaka, KisuThis paper examines progress and prospects of macroeconomic convergence in SADC. The study uses descriptive analysis and statistical tools to establish convergence. Under statistical tools, we use gap analysis and box-whisker plots to observe the general behaviour of relevant variables over time, as well as convergence at individual level towards the targets. Empirical analysis indicates that performance of SADC countries against macroeconomic convergence targets has been rather mixed, largely because some targets are overly ambitious. The majority of the countries are not converging to the set macroeconomic convergence criteria, although overall performance is better over the years. Performance of public debt against its target has been the best amongst all of the targets, with 12 of the 14 member states within the target in 2011. The worst performance is with regard to import cover, with inflation, fiscal deficit and real GDP growth somewhere in between. There is a clear tendency of convergence in monetary policy across SADC countries, as reflected in substantial decline in inflation rates over the past two decades. Most countries have made good progress in bringing inflation rates towards single digits. Most importantly, for most SADC member states, public finances are in a much better state than previously, with fiscal deficits at manageable levels in many countries, and public debt at sustainable levels. However, despite evidence of the tendency for macroeconomic convergence, this has not led to sustainable economic growth. The majority of the countries are not converging to the set MEC, although overall performance is better over the years. Countries are progressing towards the criteria at different rates, so convergence per se may not be the most important issue.
- ItemExternal aid inflows and the real exchange rate in Ghana(AERC, 2001-11-01) Harry A. SackeyThis paper develops an empirical model for Ghana’s real exchange rate with special focus on foreign aid. The novelty of this study is the interfacing of exports with a policy environment, using aid as proxy, to see how it affects export performance. The paper finds that although aid dependence is quite high, aid inflows lead to depreciations in the real exchange rate. Aid inflows have also had a positive impact on export performance. The paper concludes that for external aid to be an effective investment, policy management needs to focus on ensuring the prevalence of sound macroeconomic fundamentals, among others.