Macro Economics

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Analysing Multidimensional Poverty in Guinea: A Fuzzy Set Approach
(AERC, 2012-12) Diallo, Fatoumata Lamarana
This study examines the multidimensional aspect of poverty in Guinea, taking into account both the monetary and non-monetary dimensions of poverty. We use data from the Full Base Survey on Poverty Assessment (FBSPA, 2002-2003). The methodology relies on the fuzzy set approach of Dagum and Costa (2004), which is supplemented by the decomposition methods of Mussard and Pi Alperin (2005). The main results that emerge are: i) the identification of the key variables associated with poverty; and ii) the identification of deprivation state according to selected attributes for different groups such as natural regions, administrative regions, area of residence, gender, religion and household size. The effect of attributes on the deprivation of each group and the global poverty index has also been tested.
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.
The Behavior of Income Velocity in Tanzania 1967-1994
(AERC, 1996-11) NDANSHAU, MICHAEL 0. A
Not available
The cost of aid tying to Ghana
(The African Economic Research Consortium, 2004-10) Osei, Barfour
his study investigates the prices of tied foreign aid imports by estimating the price differentials between tied aid imports and non-aid imports from bilateral sources to Ghana. The study finds a significant mark-up on the prices of tied aid imports relative to non-aid imports, which translates into substantial cost to Ghana. Several reasons, both in Ghana and in the donor countries, could be found for the estimated price differentials. Ghana needs to take steps to improve its investment climate, as a way of reducing investment risk, which in turn will enhance the confidence of export financiers to reduce the incentive to mark up prices of tied commodities. On the part of donor countries, there may be need to examine the market for the supply of aided commodities towards the liberalization of such markets. It is suggested that although the higher costs on tied imports may be a necessary price Ghana had to pay to obtain aid, the associated cost provides a case for the cancellation of the bilateral aid debt of Ghana.
Determinants of Expected Poverty Among Rural Households in Nigeria
(AERC, 2008-09-02) O.A. Oni; S.A. Yusuf
Vulnerability measures are becoming tools for evolving proactive steps to alleviate poverty. Against this backdrop, this study examined the determinants of expected poverty (a measure of vulnerability) among rural households in Nigeria. The data for the study were obtained from the merged General Household Survey (GHS) and the National Consumer Survey (NCS) of 1996. The cross-sectional data were augmented with certain covariate factors. The data were analysed using three-stage feasible generalized least squares (3FGLS). Both idiosyncratic and covariate factors affect the expected log per capita consumption of rural Nigerians. The overall expected poverty for the country at 0.535 is 1.02 times the observed poverty in 1996. Higher expected poverty is correlated with living in the North East, no formal education, farming, older head of household, large household size and male-headed household. The North East region has both lower mean per capita consumption and higher variance compared with other regions of the country. Consumption variance is highest for households whose heads have secondary education, while households whose heads have no formal education have the lowest mean expected consumption. Farming households have lower mean per capita consumption than nonfarming households. Male-headed households have both lower mean consumption and higher consumption variance relative to their female-headed counterparts. Further, household heads below age 20 have the lowest mean consumption and the highest consumption variance. Households with more than ten members have very low mean consumption and very high consumption variance. Depending on whether there is low mean consumption or higher consumption variance or both, policy strategies suitable for the different groups will vary from increased mean per capita consumption to consumption smoothening or both.
The Determinants of School Attendance and Attainment in Ghana: A Gender Perspective
(AERC, 2007-12-28) Harry A. Sackey
This study examines the determinants of school attendance and attainment in Ghana with a view to deriving implications for policy direction. Using micro-level data from the Ghana living standards surveys, our gender disaggregated probit models on current school attendance and attainment show that parental education and household resources are significant determinants of schooling. The effect of household resources on current school attendance is higher for daughters than it is for sons. It appears that for male and female children the impact of household resources on school attendance has reduced, statistically speaking. Father’s schooling effects on the education of female children decreased between 1992 and 1999. Mother’s schooling effects on school attendance of daughters in 1992 were not significantly different from those realized in 1999. However, the effects of mother’s schooling levels on school attendance of male children appear to have reduced. Other significant determinants of children’s schooling are the age of children, school infrastructure, religion and urban residency. The paper concludes that education matters and has an intergenerational impact. Arguably, sustainable poverty reduction approaches cannot ignore the role of education and implications for employment, earnings and social development. Hence, gender sensitive policies to ensure educational equity are vital.
Determinants of the Capital Structure of Ghanaian Firms
(AERC, 2008-03-01) Joshua Abor
This study compares the capital structures of publicly quoted firms, large unquoted firms, and small and medium enterprises (SMEs) in Ghana. Using a panel regression model, the paper also examines the determinants of capital structure decisions among the three sample groups. The results show that quoted and large unquoted firms exhibit significantly higher debt ratios than do SMEs. The results did not show significant difference between the capital structures of publicly quoted firms and large unquoted firms. The results reveal that short-term debt constitutes a relatively high proportion of total debt of all the sample groups. The regression results indicate that age of the firm, size of the firm, asset structure, profitability, risk and managerial ownership are important in influencing the capital structure decisions of Ghanaian firms. For the SME sample, it was found that factors such as the gender of the entrepreneur, export status, industry, location of the firm and form of business are also important in explaining the capital structure choice. The study provides useful recommendations for policy direction and management of these firms
Effect of Import Liberalization on Tariff Revenue in Ghana
(AERC, 2008-06-01) Willi am Gabriel Brafu-Insaidoo; Camara Kwasi Obeng
In contributing to the ongoing debate on the impact of trade liberalization, this paper investigates the quantitative effect of import liberalization on tariff revenue in Ghana. A decomposition analysis was conducted to determine the relative effects of the different features of the import policy reforms. In addition, the impact of tariff rate reductions on tariff revenue was inferred using estimated results from the real imports equation. The study indicates that import tariff revenue is neither buoyant nor elastic in Ghana. Even though exchange rate depreciation over the liberalization period has increased tariff revenue, it is offset by the revenue-reducing effect of tariff reductions over this period. Moreover, the net effect of import liberalization in the form of reductions in the average tariff rate has been negative. The study recommends further improvements in customs administration and duty collection mechanisms to reduce leakage, an effective detection of evasion, enforcement of penalties, and tax replacements as key complementing measures.
The Effect of Price Stability on Real Sector Performance in Ghana
(AERC, 2011-01) Quartey, Peter
Monetary policy in Ghana has, over the years, focused on ensuring price stability or low inflation. The aim of the price stability policy is to provide a stable environment for real sector activities to flourish. However, the outcome of the policy on real sector activities has not been subjected to any empirical investigation and this forms the focus of this study. The study, specifically, examines how the policy of price stability, pursued by the Bank of Ghana, has affected real sector performance. It also examines the revenue and "growth maximizing" rate of inflation for Ghana using data from Bank of Ghana as well as from World Development Indicators (WDI). Subsequently, the relationship between inflation thresholds and real sector performance is examined. This is complemented with bimonthly data to discuss the trends in business confidence during the recent price stability regime. The study finds that economic performance is higher under low inflation periods than when inflation is high. It also establishes the existence of threshold effects of inflation on economic growth.
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.
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.
Exchange rate regimes and inflation in Tanzania
(AERC, 2004-02-02) Longinus Rutasitara
The study examines the influence of the major determinants of inflation with a particular focus on the role of exchange rate policy changes. The gradual change in policy orientation from “controls” to “market” in Tanzania is associated with a change from a highly controlled exchange rate (until 1985) to a more liberalized regime from 1986 to the present (2002). The parallel exchange rate dominated price changes from the late 1970s to 1985; the parallel premium tapered off gradually from 1986, almost disappearing by 1992. The problem of inflation cuts across both regimes despite improvements in the past four to five years. The model estimations using quarterly data for 1967–1995 show that the parallel rate had a stronger influence on inflation up until the early 1990s compared with the official rate. Continued macroeconomic (tighter monetary and fiscal), trade and exchange rate reforms, and slow but steady improvements in the growth rates of GDP, may explain the recent (1993–2002) fall in inflation and a more “stable” market for foreign exchange in the inter-bank foreign exchange market (IFEM) arrangement. The charged debates of the 1980s about devaluation are no longer fashionable, but the exchange rate remains potentially sensitive to exogenous shocks and certainly any policy reversal or similar lapse.
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.
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.
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.
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.
Governance and Economic Growth in Cameroon
(AERC, 2012-12) Sikod, Fondo; Teke, John Nde
Endowed with significant natural resources—petroleum, forestry and a rich agricultural base—and sufficiently skilled human resources, Cameroon has the potential to be one of the wealthiest countries in sub-Saharan Africa, yet it has not been able to develop since independence. This is an indication that resources alone cannot significantly lead to sustainable growth. This study has established that political and economic governance play a key role in growth. The paper has empirically assessed the impact of governance on the performance of the Cameroonian economy. In the paper, we have used the models of Knack (2002), Edison (2003), Baliamoune-Lutz (2005) and Easterly et al. (2006) on governance and economic growth, to establish that there is a positive and significant relationship between governance and economic growth. We have also used the results of the model by Edison (2003) to cost bad governance. Using the coefficients from his findings, we have established that if governance measures in Cameroon improved from an index of -0.72 to the sub-Saharan index of -0.49, the country’s gross domestic product (GDP) per capita would rise from US$600 to US$900. If the governance index for the country were to improve to the global level of 0.13, the GDP per capita for Cameroon would climb from US$600 to US$2,760. We have also used a study carried out by Transparency International Cameroon to reinforce the findings of Knack (2002), Edison (2003) and Baliamoune-Lutz (2005). Since progress towards good governance in Cameroon has at best been mediocre, it is not surprising that the economy has remained fundamentally under-developed.
Government Capital Spending and Financing and its Impact on Private Investment in Kenya: 1964-2006
(AERC, 2011-08) . Oyieke, Samuel O
This paper examines the relationship between public investment and its financing on private investment in Kenya for the period 1964-2006. Using an error correction framework and time series data for the fiscal years 1964-2006, the study shows that investment in agriculture has a significant positive effect on private investment, while domestic debt has a significant negative effect. Political risk, real exchange rate, external debt, and tax though negatively related are insignificant. Investment in infrastructure has an insignificant positive effect. These findings have important policy implications that investment in agriculture crowds-in private investment. To encourage private investment, the government should channel increased resources to the agricultural sector. Domestic debt crowds-out private investment, thus the government should reduce its dependence on domestic borrowing to finance budget deficit.
Growth, Income Distribution and Poverty: The Experience of Côte d'Ivoire from 1985 to 2002
(AERC, 2012-11) Kouadio, Koffi Eric,; Gbongue, Mamadou; Yaya, Outtara
The aim of this study was to demonstrate the importance of analysing the relationship between growth, income distribution and poverty in Côte d’Ivoire. The study was based on the multilateral comparison method used to measure the effects of growth and inequality on the poverty dynamics. The data used were taken from the Côte d’Ivoire Living Standard Survey (CILSS) carried out by the National Institute of Statistics (INS); they were collected from households in 1985, 1993, 1995, 1998 and 2002. The study assumed that the survey data were comparable. As a first step we followed the procedure used by Kakwani (1997), which involved measuring the effects of growth and inequality on poverty on the basis of multilateral comparison. As a second step, we used the approach of Duclos (2002) to measure the growth–poverty elasticity and the poverty–inequality elasticity. The results showed that inequality was the key factor in the poverty evolution of Côte d’Ivoire. They further showed that this evolution was not linked to a demographic phenomenon, but rather to intra-group poverty and an unequal distribution of income within these groups.
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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