International Economics

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DETERMINANTS OF ECONOMIC GROWTH IN BOTSWANA THROUGH THIRLWALL’S MODEL
(University Of Bostwana, 2020-05-06) BAITSILE, PEO NNANG NAIMA
The purpose of this paper is to estimate economic growth of Botswana. The study relies on the Thirlwall’s model and its extension to estimate the price and income elasticities of export and import demand using the productivity data for the period of 1980-2016. The estimation for this work is based on the Auto-Regressive Distributed Lag, (ARDL), modeling to estimate the price and income elasticities, which is based on the conventional equations of exports and imports demand. The practical application of the estimated elasticities provides insights about the determinants of the economic growth of the Republic of Botswana, thus, the Thirlwall’s hypothesis of balance of payments constrained growth is used. The results from the imports and exports equations showed the following. The estimated price elasticities of demand for imports and exports were unexpected and statistically insignificant. The estimated income elasticities of demand for imports and exports were as expected and statistically significant. From the extended imports and exports equations, the price elasticities of imports were unexpected and statistically significant. The income elasticity of imports and exports were as expected and statistically significant. Practical applications of the estimated price and income elasticities of demand for imports and exports gave the economic growth rates of 5.63 percent and 4.97 percent respectively for the Thirlwall and extended Thirlwall’s model with the export growth rate of 4.87 percent. The overall results indicated that Thirlwall hypothesis holds in determining Botswana’s economic growth rate. This correlated with the study done by Matsheka in 1998, where when calculating Botswana’s economic growth rate, the results showed that Botswana’s economic growth rate could be predicted using the Thirlwall’s model.
DETERMINANTS OF EXPORT DIVERSIFICATION IN GHANA
(University of Cape Coast, 2019-04-22) GBOLONYO, EMMANUEL YAO
The present study examines the determinants of export diversification in Ghana. For this purpose, Theil index is used to estimate the degree of export diversification. The study used annual time series data from 1983 to 2016 to estimate the structural, economic/policy and macroeconomic determinants of export diversification within the Auto Regressive Distributed Lag (ARDL) framework. The results of this study indicated that GDP per capita, real effective exchange rate, trade openness, foreign direct investment and infrastructure, improve export diversification in both the long-run and short-run while terms of trade enhances specialisation. Based on the findings of this study, the study recommended that government should take advantage of the fall in Cedi value by exporting more products to markets with high demand. The Ministry of Trade and Industry should also develop a competitive capacity for trade in order to eliminate principal domestic barriers to international business development, increase its investment in basic and trade-related infrastructure. It is also recommended that the government through the Ghana Investment Promotion Center should invest in promoting a broader variety of FDI opportunities to investors, while also developing other sectors of the economy in order to boost diversification.
DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN SELECTED SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) FOR THE PERIOD 2001 to 2010
(University of Zimbabwe, 2014-05-06) MUTUNGWAZI, HAPPY
The Southern African Development Community (SADC) regional bloc has been undertaking investment reforms with a view of creating an enabling and conducive environment for all their member states to increase Foreign Direct Investment (FDI) inflows. FDI is preferred to because of its arguable economic benefits among them that it closes domestic resource gaps. Furthermore, FDI can reduce unemployment levels common in several SADC nations. FDI introduces managerial skills through technological transfers, as well as producing export enhanced economic developments. In view of the foregoing, many SADC countries have promulgated various policies that can incentivise foreigners to pour FDI inwards. Despite these efforts, studies have shown that FDI levels are dismally low as compared to the rest of Africa. Efforts to establish the reason for such poor FDI inflows have been extensively carried out in many studies. However, these studies omit some recent key noneconomic determinants that affect FDI inflow to the SADC bloc. This study analyses the determinants of FDI inflow to the SADC bloc for the recent decade of 2001 to 2010 using the panel data methodology. Our study estimated macroeconomic determinants of FDI in the SADC region namely: rates of interests, current account balances, gross domestic product, national external debt, and exchange rates as well as institutional determinants of FDI namely: political stability, control of corruption and voice and accountability issues. Interest rates, exchange rates, and gross domestic product variables were all found to be important determinants of FDI in the region. All institutional variables were proved to be essential determinants of FDI in the SADC bloc. The study concluded that SADC FDI inflows are positively influenced by a growing demand in terms of an expanding SADC bloc coupled with a stable single currency exchange rate. Policies that advocate for a bigger integrated common economy and the adoption of single currency are the best way in attracting large FDI inflows to SADC. SADC states should, in addition pursue policies that take into considerations the effective uphold of political stability and absence of violence, measures to nip out corruption and a tolerant governance structure. The unstable macroeconomic environment obtaining in many SADC states such as high interest rates are negatively affecting FDI inflows to the region.
EFFECTS OF THE AFRICA GROWTH AND OPPORTUNITY ACT ON EXPORTS OF MEMBER STATES OF WEST AFRICA MONETARY ZONE TO THE UNITED STATES
(UNIVERSITY OF CAPE COAST, 2019-02-01) KULU, Evans
In the quest to improve the economic fortunes of developing countries, varieties of trade preferences have been introduced. This mechanism appears to be in support of the ‘trade not aid’ campaign. The AGOA trade preference enacted by the US in the year 2000 is one that has received much recognition in Sub Saharan Africa as a means of boosting export hence economic development. The importance of trade, especially in the developing countries calls for the need to study the effects of such a trade preference. This study is motivated by the relatively limited literature investigating the effects of trade preferences on regions and respective countries as well. Since results for a region might not be true for the individual countries this study focuses on how AGOA has affected exports of the zone and individual WAMZ member states to the US. Using gravity covariates and other export determinants for the period 1980 to 2016 sourced from IMF DOTS, WDI and CEPII, the study employs the gravity model and the fixed and random effects estimation techniques. After correcting for heteroscedasticity and a possible serial correlation, the study reveals that the AGOA trade preference has a negative effect on the exports of the WAMZ to the US. It also shows that exports from Ghana, Guinea and Liberia to the US have significantly reduced while exports from Nigeria and Sierra Leone to the US have increased significantly under AGOA. It is therefore suggested that WAMZ states renegotiate for relaxation of rules of origin and as well expansion of product coverage to include products in which the WAMZ member states have comparative advantage.
AN EMPIRICAL INVESTIGATION OF FACTORS THAT DETERMINE DEMAND FOR INTERNATIONAL RESERVES IN THE SADC REGION
(UNIVERSITY OF MALAWI, 2020-09-23) MANJA, LASTON PETRO
With levels of international reserves in countries of the Southern African Development Community (SADC) reaching unprecedented high levels in spite of increased liberalization in the region, the search for responsible factors has reached a fascinating peak. Provided that recent studies covering wider economic structures find precautionary motives to be more relevant in explaining the phenomenon in the modern era, this study aims at unraveling the determinants of demand for international reserves in this economic structure by mainly augmenting the buffer stock model. For a sample period from 1980 to 2015, the study adopts the Blundell-Bond System Generalized Method of Moments (GMM) and the Bias-Corrected Least Squares Dummy Variable (LSDVC) estimators, all due to their suitability in allowing the inclusion of a lagged dependent variable as a regressor in the model while handling any possible endogeneity. It is found that there exists a U-shaped relationship between reserves hoarding and development in the region. Additionally, opportunity costs, exchange rate and reserves volatility (adjustment costs) as well as membership to the Common Monetary Area (CMA) and the MMZT (Malawi, Mozambique, Zambia and Tanzania) are significant determinants of demand for reserves in the SADC. This signals that unions within the SADC will likely result in a higher demand for reserves as economies seek to meet subsequent reserve targets. In terms of the longstanding debate between precautionary and mercantilist motives for reserves demand, the study finds evident precautionary rather than mercantilist factors in the SADC region as is the case with most low income countries.
EXCHANGE RATE MOVEMENTS AND AGRICULTURAL TRADE IN MALAWI
(UNIVERSITY OF MALAWI, 2020-08-24) NG’ONG’OLA, CHIMWEMWE
Malawi is one of the countries that heavily relies on agriculture which accounted for 27.9% of the country’s Gross Domestic Product (GDP) in 2016. About 80% of Malawi’s exports are agricultural products with tobacco, sugar, tea and cotton as the main exports while imports are dominated by machinery, fuels, fertilizers and other intermediate inputs. The study aimed at examining the relationship between exchange rate movements and agricultural trade in Malawi specifically to assess the impact of exchange rate movements on agricultural exports and to assess the impact of exchange rate movements on agricultural imports. The study used annual data from 1980 to 2017 and the Autoregressive Distributed Lag was the estimation model used. The study found that there was no relationship between exchange rate movement and agricultural exports as well as agricultural imports in the long run however in the short run there was a negative relationship between exchange rate and agricultural imports.
EXCHANGE RATE VOLATILITY AND TAX REVENUE: EVIDENCE FROM GHANA
(University of Cape Coast, 2017-05-22) OFORI, ISAAC KWESI
The need for the Ghanaian government to generate enough revenue for development is becoming increasingly crucial in the era of slow economic growth, growing unemployment and high debt. However, tax revenue performance over the years reveals an unstable pattern. One key factor that has been overlooked in the literature in terms of the determinants of tax revenue is exchange rate volatility. Coming from the background of volatility in Ghana’s exchange rate, could it be the reason for the instability in the trend of tax revenue? This question is the subject matter of this study. To estimate the effect of exchange rate volatility on tax revenue, the study employed the Auto Regressive Distributed Lag (ARDL) technique after the yearly exchange rate volatilities had been generated using the GARCH(1,1) method. The results of the study suggest that exchange rate volatility has a deleterious effect on tax revenue both in the short-run and long-run but the effect is more pronounced in the long-run than the short-run. The study recommends that the Bank of Ghana step-up its exchange rate stabilization efforts to reduce exchange rate risk imposed on international trade players.
FIRM-LEVEL DETERMINANTS OF EXPORT PERFORMANCE IN EAST AFRICAN COMMUNITY COUNTRIES
(MAKERERE UNIVERSITY, 2020-09-23) MUSIMENTA, HANNINGTON
This study sets out to examine the firm-level determinants of export performance in the East African Community countries using World Bank Enterprise Survey data set for Uganda, Kenya and Tanzania (2013) Rwanda (2011) and Burundi (2014). The study employs the Heckman Two-stage model to explain the relationship between export performance and the firm level variables that range from firm characteristics to entrepreneurship characteristics and the business environment. In the model stage one is export propensity that is used for selection basing on whether the firm exports or not and stage two is export intensity that is used to measure export performance as the percentage of the firm’s sales that are exported. Our results from the Probit estimation in stage one indicate that firm age, firm size, foreign ownership, possession of IQC, location of a firm in the capital city, easy access to finance, formal training of the firm employees and manager’s experiences increased the firm’s participation in the export market however corruption, informal competition and tax obstacles reduce the possibility of firms participating in the export market. From stage two we establish that firm age, firm size, foreign ownership, location of a firm in the capital city and access to finance, increased the percentage of the firm’s sales exported. On the other hand, tax obstacles, corruption and competition from the informal sector firms reduced it. Our results therefore suggest that firms should acquire international quality certification, invest more in R&D, undertake extensive training of their workers, hire experienced managers, in addition government should Provide a conducive business environment to the firms engaged in exportation through reducing the tax obstacles, fighting corruption, availing cheap credit to the firms and formalization of firms in the informal sector.
GROWTH CONVERGENCE IN SOUTHERN AFRICAN CUSTOMS UNION (SACU): A DYNAMIC PANEL APPROACH
(University Of Bostwana, 2017-06-06) Tshireletso, Baboloki
This study examines the growth convergence within SACU economies using the unbalanced panel dataset for the period of 1992 to 2015. The study used a dynamic panel approach to check if less developed countries in SACU registered more growth than more developed countries in order to converge to a common steady state. In support to the main objective of the study we used the two GMM estimators (that is the one-step system GMM and one-step difference GMM models) to investigate growth convergence. Validity of these models is confirmed by the second order serial correlation test and Sargan test for overidentifying. The results shows that real GDP per capita as a measure of growth is significant in determining convergence for both the one-step system GMM and one step difference GMM estimators. This implies that within the region less developed countries attained growth in order to converge to their own steady state within the period of 1992 to 2015.The results has confirmed to conditional beta convergence and absolute beta convergence for SACU countries. The policy implication of this finding is that policy makers must cautiously implement economic development policies that aim to promote growth of GDP per capita and reduce on areas that discourage the growth of the country in order to converge. Using the one-step system GMM model shows that the highest rate of convergence is about 9% within the SACU region while the highest rate of convergence is about 5% using one-step difference GMM model. This difference is supporting literature that suggests that the system GMM produces more efficient estimates. The results for the one-step system GMM shows more significant coefficients for variables than the difference GMM estimator for panel estimation. Foreign Direct Investment (FDI), trade openness, physical capital and tertiary school enrollment positively and significantly affect economic growth and convergence as expected. Therefore this implies that for FDI, the more the country is attracting foreign investors, this augments the levels of domestically human capital. For trade openness (OPEN), the more the individual country is open to trade the higher the gain in productivity growth due to increase in flows of goods and services. Therefore these cases promote high economic growth in order for countries to converge.
THE IMPACT OF REAL EXCHANGE RATE VOLATILTY ON ECONOMIC GROWTH: EVIDENCE FROM UGANDA
(Makerere University, 2020-11-22) WILLLIAM, SSEMYALO
Thestudyexaminedtheimpactofrealeffectiveexchangeratevolatilityoneconomic growthinUganda.Thestudyusedquarterlytimeseriesdatafortheperiodof1993to 2015.TheJohansencointegrationandvectorerrorcorrectionmodelwasusedto determinetheimpactrealexchangeratevolatilityoneconomicgrowthinUganda.The explanatoryvariablesinthisstudywererealexchangeratevolatility,government expenditure,labor,exportsandimports.Resultsfrom thestudyrevealedthatreal effectiveexchangeratevolatility,labor,governmentexpenditureandexportswerefound tobestatisticallysignificantinexplainingeconomicgrowthofUgandainthelongrun withallhavingpositiverelationship.Howeverimportswerefoundtohaveanegative relationshipwitheconomicgrowthinthelongrun.Intheshortrunrealeffective exchangeratevolatilityandimportshadnegativerelationshipwitheconomicgrowth. From the regression results study recommends that inorder to spur economic growth the government should introduce import substitution both in the short run and long run. The governmentshouldalsointerveneinforeignexchangemarketonlyintheshortrun. The government should take significant steps to increase the standard of exported goods to make smooth balance of trade.There should be an increase in government expenditure inhuman capital because this will spur economic growth in the long run.
THE INCIDENCE AND DYNAMICS OF INTRA-INDUSTRY TRADE BETWEEN GHANA AND ECOWAS
(University of Ghana , Legon, 2012-06-06) OFFEI, EMMANUEL LARBI
Since intra-industry trade (IIT) was first noticed in the 1960s, theoretical and empirical studies on this type of trade have being growing rapidly. Very few studies however, have investigated IIT in the Economic Community of West African States (ECOWAS) region. This current study attempts to bridge the literature gap by examining the incidence and determinants of IIT between Ghana and its ECOWAS trading partners using empirical trade data from 2004 to 2010. The results show evidence of IIT between Ghana and ECOWAS although it is low as compared to other regions. Sectors found to exhibit high incidence of IIT are transportation, animal products and chemicals industries. At the country level, Cote d’Ivoire has the highest IIT incidence with Cape Verde and Guinea Bissau having no IIT with Ghana. The determinants of IIT are estimated using the gravity model and the results indicate that per capita income, dissimilarity in per capita income, foreign direct investment, and common language affect IIT positively while gross domestic product and geographic distance influence IIT negatively. The main hypothesis guiding this study is that similarity in per capita income between Ghana and the ECOWAS trading partners stimulates IIT. This hypothesis is however rejected because the study finds a positive correlation between dissimilarity in per capita income and intraindustry trade instead of the a priori expectation of negative sign. The study recommends that policies should be introduced to encourage the expansion of the manufacturing sector in member countries. Exchange rate variability and bottlenecks in the level of traffic flow along interstate corridors must be removed to enhance intra-industry trade within the subregion.
REAL EXCHANGE RATE BEHAVIOUR IN TANZANIA
(University of Dar es Salaam, 2004-10-06) PANTALEO, INNOCENT M.
In this study the behaviour of Tanzania’s real exchange rate for the period 1966 to 2001 is examined through investigating the determinants of real exchange rate and its misalignment. The period was chosen to cover the years in which the Bank of Tanzania has been under operation. The study has employed econometric techniques of time series, with exchange rate misalignment analyzed using two approaches, the first one being use of the difference between actual real exchange rate and equilibrium real exchange rate and the second one using exchange rate premium as a proxy of misalignment. The results show that the long run determinants of real exchange rate in Tanzania include debt servicing, openness, terms of trade and reforms. The main hypothesis that periods of major external imbalance, foreign exchange control and fixed exchange rate regime are characterized with exchange rate misalignment which tend to disappear during the period of floating exchange rate regime was not rejected. Hence the conclusion that the period of major external imbalance, foreign exchange control and fixed exchange rate regime in Tanzania was characterized by exchange rate misalignment, which is disappearing during the period under which the economic reforms are being implemented. In addition, the results show that in the absence of other interventions, actual real exchange rate converge very slowly towards the long run equilibrium level. Hence, the study recommends the use of the nominal devaluation, in the short run as a powerful tool for reestablishing real exchange rate equilibrium.
REGIONAL ECONOMIC INTEGRATION AND AGRICULTURAL SECTOR EXPORT PERFORMANCE (1980-2016): CASE OF COMESA
(UNIVERSITY OF ZIMBABWE, 2020-09-24) ABIGAIL, CHARI
The study examined the effects of regional economic integration on the agricultural sector export performance in the Common Market for Eastern and Southern Africa (COMESA) region. Panel data was used for the member countries from 1980 to 2016. Gravity model and Software for Market Analysis and Restrictions on Trade (SMART) model were used in estimating the effects of regional economic integration comparing pre and post COMESAFTA period. As suggested by the Hausman test, the random effects model was used to examine the effects of regional economic integration on export performance due to its consistency and efficiency. The results from the study showed that the GDP of the exporting country, GDP per capita of the importing country and the regional economic integration dummy positively affect the agricultural sector export performance in the region. Using the SMART model, the results showed that the formation of the free trade area created trade worth close to US$65 million and positive trade diversion value worth US$5.6 million as well as the total trade effect of US$70.4 million. From the results, the trading bloc policy makers are encouraged to deepen the economic integration so that the policies in the agricultural sector increase the sector’s production hence exports. Member countries should also adopt policies that create an investor friendly environment if they are to increase their human development and infrastructure. The study suggested that the trading bloc and its members should engage in research and development so as to advance their technologies hence innovation to increase their gross domestic product.
TRADE OPENNESS, EXCHANGE RATE FLUCTUATIONS AND MANUFACTURING OUTPUT IN SUB-SAHARAN AFRICA
(UNIVERSITY OF CAPE COAST, 2021-03-24) AYIRIKAME, ERIC KWAMEFIIK
Many industrialized economies in the world achieved higher economic growth through the industrialization of their manufacturing sector. However, in Sub-Saharan Africa, the development of the manufacturing sector appears to be in decline. In the quest to increase the economic growth of these developing countries, varieties of trade policies and exchange rate policies have been introduced. These policies were subsequently introduced in Sub-Saharan Africa (SSA) as a means of boosting economic growth and development. The importance of Trade Openness and exchange rate policies in developing countries necessitated the need to study the effect of Trade Openness and exchange rate fluctuations on the manufacturing output of SSA. The study also focuses on the role of electricity as an intermediating factor to Trade Openness, threshold effect, and heterogeneity across groupings. Using the principal component analysis to generate Trade Openness Index and other determinants from 2004 to 2017, (sourced from WDI and World bank doing business indicators), the study employed fixed and random effect estimation techniques in the analysis. The study revealed that less Trade Openness has a negative effect on manufacturing output in SSA. Exchange rate fluctuations have a positive effect on manufacturing. Therefore, it is recommended that the reduction of the trade openness index should be encouraged. Also, exchange rate stabilization policies should be encouraged to promote a good business environment.

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