Macro Economics

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Macroeconomic constraints and medium-term growth in Kenya: a three-gap analysis
(AERC, 1994-05) Mwega, F. M.; Mwangi, Njuguna; -Ochilo, F. Otewe
Macroeconomic adjustment, trade and growth: Policy analysis using a macroeconomic model of Nigeria
(AERC, 1995-03) Soludo, Charles Chukwumo
Abstract not available
THE TRANSMISSION OF SAVINGS TO INVESTMENT IN NIGERIA
(AERC, 1996-03) SOYIBO, ADEDOYIN
Not available
The Behavior of Income Velocity in Tanzania 1967-1994
(AERC, 1996-11) NDANSHAU, MICHAEL 0. A
Not available
Foreign Aid and Economic Performance in Tanzania
(AERC, 1997-03) NYONI, TIMOTHY S.
This study examines the impact of foreign aid inflows to Tanzania on macroeconomic variables such as the real exchange rate, export performance, government expenditure, investment and growth. The main hypothesis of the study is that aid inflows cause real appreciation. To test this hypothesis, we used comtegration techniques and an error-correction model to estimate the long-run equilibrium and the short-run real exchange rate, respectively. The estimated model results suggest that foreign aid inflows, openness of the economy and devaluation of the local currency lead to depreciation of the real exchange rate, while government expenditure tends to appreciate the real exchange rate. The study recommends that the correct policy response to the influx of foreign aid is to direct the aid to domestic productive investment in order to induce a positive supply response. The government should also reduce its expenditure and enhance economic liberalization.
Study of data collection procedures
(The African Economic Research Consortium, 1998-03) Ariyo, Ademola; Adeniran, Adebisi
TheproblemofinconsistencyofAfricandataisnotnew.Thedeterminationofthenature andseverityofthisphenomenon,however,hasbecomeofmuchconcerntointerested observers.TheapropriatenesofthisconcernisreinforcedbythenedofAfrican countriesfortimelyandacuratedatainordertoensurethesucesfulimplementation oftheireconomicreformprogrames.Inthisregard,curentresearchhaspointedout widedivergencesinAfricandatapublishedbyvariousinternationalorganizationsas welasthecentralstatisticalorganizationsandotherpublicagenciesineachcountry. Aspartoftheconcertedefortstoidentifythemajorcausesofthedataproblem,this studyidentifiesthesimilaritiesandmajordiferencesindatageneratingandmanagement activitiesamongselectedorganizations.Twodata-generatingagenciesinNigeriawere alsocoveredbecauseaprecedingstudy,whosefindingspromptedthisresearch,was basedonNigeriaasacasestudy.Thefindingssugestwidedivergencesindefinition andmeasurementofconceptsadoptedbytheseorganizations.Thewidespreadnon- renditionand/ortheinadequacyofreturnsbyAfricanmembercountriestotheinternational andmultilateralinstitutionsalsonecesitaterelianceonstafestimatesassubstitutesfor misingdata.Theselargelyacountforthesignificantdiferencesindataonidentical indexesreportedonthesamecountrybytheseorganizations.Thereportthereforesugests thedevelopmentandenforcementofgeneralyaceptedstatisticalprocedures.Italso advocatestheidentificationandsatisfactionofdata-relatedcapacitynedsofeachAfrican country.
External aid inflows and the real exchange rate in Ghana
(AERC, 2001-11-01) Harry A. Sackey
This 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.
An examination of the sources of economic growth in Cameroon
(AERC, 2002-03-01) Aloysius Ajab Amin
Using the aggregate production function as the basic model, the study examines the main components of Cameroon’s growth rates between 1961 and 1997 and the driving force behind the sources of growth in the economy. Both parametric and non-parametric approaches are used. The results show that the contribution of the growth of factor inputs is greater than the contribution of total factor productivity, with capital input playing a larger role. At the sector level, input growth greatly influenced the primary sector output growth. The capital input tends to be the most important factor influencing output growth in both the secondary and tertiary sectors. In these two sectors, labour’s role is not effectively used or has not been boosted to effectively perform its crucial role in the economy. In developed economies studies show that total factor productivity growth plays a greater role than factor input growth. The results here suggest that factor inputs play more important roles than total factor productivity (TFP) growth with emphasis on increasing return to scale and input growth both in quantity and quality. The technology factor is not a big contributor to growth in Cameroon, which may be because of certain constraints in the economy. The results do show high growth rate of total factor productivity, thus suggesting the potential and growing importance of TFP in the growth process. Policies that would improve the quality of factor input, particularly labour, would tend to enhance the contribution of total factor productivity. Hence the policy implications are to improve human capital development as the main mover of other factors in the economy.
Public enterprise reform in Nigeria: Evidence from the telecommunications industry
(AERC, 2002-03-28) Afeikhena Jerome
This study examines the qualitative and quantitative evidence relating to allocative and productive efficiency in the publicly owned Nigerian Telecommunications Limited (NITEL) in the wake of its commercialization and the deregulation in 1992. Estimates of changes in internal efficiency using total factor productivity analysis suggest a substantial improvement in efficiency as a result of the regime shift. Furthermore, the reform undertaken resulted in increased profitability, network expansion and modernization of telecommunications services. However, the momentum generated by reform has proved impossible to sustain. The industry is still characterized by under-investment and large unmet demand. The study recommends greater private sector participation in the delivery of telecommunications services in Nigeria, the introduction of competition in the sector, and the strengthening of ongoing reform efforts to embrace full privatization of NITEL with a view to overcoming protracted constraints on telecommunications performance and growth.
Asset pricing and information efficiency of the Ghana Stock Market
(AERC, 2002-03-28) Kofi A. Osei
The study looks at two main objectives, the asset pricing characteristics and the response to annual earnings announcements of the Ghana Stock Market (GSM). The study hypothesizes that the GSM, as a typical African emerging stock market, is not efficient with respect to annual earnings information releases to the market. The assessment of the market response to information is done by measuring abnormal returns over a 17-week event window when the annual earnings information is released. Analysis of cumulative abnormal returns (CAR) is also carried out. The study establishes that 13 out of the 16 stocks studied have systematic risk lower than the market risk. Three stocks have betas greater than the market beta of one. Five out of the 13 stocks with systematic risk lower than the market risk have negative betas. Their t-values are also not significant. There are considerable intra-industry differences in systematic risk values of the listed stocks. On the market response to earnings information, the analysis of CAR shows that the market learns about the impending annual earnings announcements. The market drifts up for good news and down for bad news over the period before the event announcement date. The study establishes that the market continues drifting up or down beyond the announcement week, i.e., week zero. This is inconsistent with the efficient market hypothesis (EMH). The conclusion is that the Ghana Stock Market is inefficient with respect to annual earnings information releases by the companies listed on the exchange.
Trade liberalization and technology acquisition in the manufacturing sector: Evidence from Nigeria
(AERC, 2002-08-01) Ayonrinde Folasade; Olayinka Ola
This study reports the impact of recent trade liberalization policies in Nigeria on the acquisition of technology by the Nigerian manufacturing sector. The report uses survey data from 94 manufacturing firms covering three sectors: textiles, chemicals and light engineering. The results suggest that the impact is limited. Some elements of trade liberalization such as the abolition of import licensing and lower tariffs increased the availability of competing goods and facilitated firms’ access to imports. However, the increasing competitive environment is yet to generate remarkable improvement in the technological activities of the firms. The respondents acknowledged that the rapid depreciation of the naira following the adoption of the liberalization policy has raised the cost of capital goods. Most of the firms agreed with the broad thrusts of government liberalization policies, hence it is important for the government to consolidate and maintain the credibility of these policies.
Productivity growth in Nigerian manufacturing and its correlation to trade policy regimes/indexes (1962–1985)
(AERC, 2002-11-01) Louis N. Chete; Adeola F. Adenikinju
While the centrality of productivity enhancement to growth acceleration is one issue around which broad consensus exists in theory and empiricism, the role of trade policy in fostering productivity growth has received only modest attention. Recently, however, a considerable body of knowledge has accumulated on the importance of trade policy to the productivity process. To be sure, there are two divergent perspectives. One view posits that trade liberalization will stifle industrial productivity by opening up the economy to superior foreign products, compelling infant industries to close up. The other, and more pervasive, holds that outward-oriented trade policy will engender overall industrial efficiency in the economy by exposing local firms to competition and thereby improve the allocation of resources across sectors. This paper computes total factor productivity growth (TFPG) for the aggregate manufacturing sector of Nigeria and across the various subsectors and correlates these with specific indexes of trade policy. The results generally corroborate the mainstream view of a positive correspondence between trade liberalization and productivity growth.
Productivity, market structure and trade liberalization in Nigeria
(AERC, 2002-11-02) Adeola F. Adeni kinju; Louis N. Chete
This study investigates the relationship between trade liberalization and the market structure and productivity performance of the Nigerian manufacturing sector. The study uses firm-level panel data for the three years from 1988 to 1990, a period of considerable liberalization in the country. The data cover 382 manufacturing firms. The study shows that in general, the productivity level of Nigerian manufacturing is very low. This reflects in part an outcome of years of industrialization strategy that stressed factor accumulation rather than the efficiency with which factors are utilized. The findings from the study show that sectors with a high component of local raw materials generally performed better than those depending on imported inputs. The study also shows that foreign ownership has an important bearing on firm performance and foreign-owned firms generate positive spillover effects on the other firms in the industry. Moreover, the findings support the current trade liberalization effort of the government as we found that the policy of trade liberalization and the lowering of average tariff rates open up the economy to foreign investment, the promotion of manufactured exports impinges positively on total factor productivity in the Nigerian manufacturing sector. However, the government needs to exercise some caution with the pace of import liberalization, as import growth rate was found to have a negative impact on productivity. While this may be a short-run phenomenon, the implication that the pace of import liberalization proceeded too fast for domestic firms to cope with
Financial liberalization and its implications for the domestic financial system: The case of Uganda
(AERC, 2003-02-02) Louis A. Kasekende; Micha el Atingi-Ego
This paper presents an analysis of the impact of financial liberalization on the conduct of banking business and its impact on the real sector. Survey results show that the overall assessment by commercial banks of financial sector liberalization is positive. Financial sector reforms and interest rate deregulation appear to have engendered efficiency gains in the banking industry and consequently growth of credit to the private sector is increasing. The econometric results also reveal that increased credit to the private sector appears to be leading economic growth. However, increased credit allocation to the private sector should not compromise monetary policy objectives. The study also recognizes the dualistic nature of the financial system in Uganda and proposes as a policy recommendation the linkages of the banking system with micro-credit institutions as one way of enhancing financial intermediation in order to promote economic growth.
Wage determination and the gender wage gap in Kenya: Any evidence of gender discrimination?
(AERC, 2003-05-02) Jane Kabubo-Mariara
This study presents an analysis of the determinants of wages as well as a decomposition of the gender gap across sectors in Kenya. The study tests the hypothesis that women participate less in the labour market partly because of their characteristics and partly because of gender discrimination in wage setting. Multinomial logit techniques and ordinary least squares (OLS) with and without sample selection are used to explain participation and earnings. The results indicate that education and other demographic factors are important determinants of the choice of sector of employment and earnings and that there is no serious self-selectivity problem. The gender gap decomposition results suggest that favouritism towards men is pronounced in all sectors, while there is no evidence of discrimination against women. The study recommends investment in instruments to reduce gender inequalities in access to education and also government policies that minimize favouritism towards men.
Tax reforms and revenue mobilization in Kenya
(AERC, 2003-05-02) Moses Kinyanjui Muriithi; Eliud Dismas Moyi
One of the key objectives of tax reforms in Kenya was to ensure that the tax system could be harnessed to mitigate the perpetual fiscal imbalances. This would be achieved through tax policies intended to make the yield of individual taxes responsive to changes in national income. In addition, it was expected that the predominant taxes in the revenue would be those with highly elastic yields with respect to national income (or proxy bases). This study applies the concepts of elasticity and buoyancy to determine whether tax reforms in Kenya achieved these objectives. Elasticities and buoyancies are computed for the pre-reform period as well as the post-reform period. Evidence suggests that reforms had a positive impact on the overall tax structure and on the individual tax handles. In fact, the elasticity of indirect taxes was low and that of direct taxes was high, especially after the reforms. Despite this positive impact, the reforms failed to make VAT responsive to changes in income, although VAT was predominant in the tax structure.
Food security and child nutrition status among urban poor households in Uganda: Implications for poverty alleviation
(AERC, 2003-05-07) Sarah Nakabo-Ssewanyana
The urgent need for in-depth analyses of the patterns and determinants of food and nutrition insecurity in urban areas in Uganda cannot be overemphasized. Using cross-sectional data, this study explores the key determinants of the food security and child nutrition status among poor households in Kampala. First, raising the incomes of the urban poor may turn out to be an effective means of reducing the food insecurity problem and child malnutrition. Second, while maternal education has a stronger impact on girls’ long-term nutrition, paternal education has a stronger impact on that of boys. Conversely, increases in income tend to have a bigger effect on girls’ current nutrition compared to that of boys. All in all, efforts to fight poverty per se may not improve the food security and nutrition status of the urban poor; other factors need to be considered.
Trade reform and efficiency in Cameroon's manufacturing industries
(AERC, 2003-06-02) Ousmanou Njikam
Does trade reform generate gains in manufacturing firm-level technical efficiency? Pooling of pre and post trade reform data for Cameroon, and estimating a single stochastic production frontier for each industrial sector, yielded empirical results showing that the average technical efficiency increased in six of eight sectors following trade reform. The post trade reform firm-level technical efficiencies increased on average at an annual rate of 1.39%, while prior to trade reform they decreased on average at the annual rate of 0.76%. Before trade reform, the restricted trade regime coupled with macroeconomic and political instability negatively affected firm-level technical efficiency. Post trade reform potential determinants of firms’ technical efficiency include export share and import penetration rate.
Efficiency of micro enterprises in the Nigerian economy
(AERC, 2003-09-07) Igbekele A. Ajibefun; Adebiye G. Daramola
This study investigates the efficiency of microenterprises in the Nigerian economy, using cross sectional data collected on 180 microenterprises selected from block-making, metalfabricating and sawmilling occupational groups. Quantitative estimates obtained from the stochastic frontier production function indicate a wide variation in technical and allocative efficiencies within and across occupational groups and across operational scales. The wide variation in the level of efficiency is an indication that there is ample opportunity for these enterprises to raise their level of efficiency. The level of education of enterprise owners was found to be highly significant in affecting the level of efficiency of the microenterprises. This implies that education is an important policy variable, and could be used by policy makers to improve both technical and allocative efficiency in the sampled enterprises. Hence, education policy that would encourage operators of microenterprises in the country to undergo literacy and training programmes would lead to substantial increase in efficiency of production and hence in the volume of output at the current level of technology. Finally, rising age of enterprise owners was found to lead to decline in the mean efficiency. Therefore, government policy should focus on ways to attract and encourage young entrepreneurs who are agile and able to put in more efforts at raising the level of efficiency.
How tied aid affects the cost of aid-funded projects in Ghana
(AERC, 2003-11) Barfour Osei
This case study of the Sixth Power Project in Ghana is an empirical analysis first, to investigate whether tied foreign aid funded inputs bear additional costs on account of price mark-up and, second, to assess the impact of the cost of tying on the concessionality of the assistance. The excess cost of tying is estimated following the “cost–difference” method and the impact of tying on the concessionality of aid is assessed through the “shadow grant” element. The basic conclusion reached from the analysis is that there is significant mark-up on the prices of funded inputs relative to the prices from alternative sources of supply. The price mark-up reduces significantly the concession embodied in the aid flows. On the part of donors, it is argued that there is need for action to liberalize the market for the supply of aid exports. Finally, while the mark-up on prices of tied aid inputs may be a price Ghana had to pay to receive the assistance, the cost to Ghana of tying provides a case for the cancellation of aid debt of the country.

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