Financial Economics

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    Tea Prices and Household Consumption Patterns in Tanzania
    (African Economic Research Consortium, 2024-02-14) Nchake, Mamello A.; Mtenga, Threza L.
    Tea production is a significant contributor to Tanzania’s output and income. The country is a price taker in regional and international tea markets. This makes it vulnerable to price shocks, which can have a detrimental impact on smallholder farmers, especially those who heavily rely on tea production for their income. This vulnerability is particularly critical for net producers who lack alternative income sources, especially in rural areas. The study uses a panel dataset from the Tanzania National Panel Survey (TNPS), collected over the periods 2008-2009, 2010-2011 and 2012-2013. The study’s main findings indicate that tea price shocks have a strong negative effect on consumption patterns of smallholder farming households in Tanzania. The results also highlight that the impact of price shocks is not uniform across all households. It varies based on factors such as the gender of the household head and the location (rural or urban). The study underscores the importance of government intervention to support households affected by price shocks. Safety net programmes and welfare management initiatives can be vital in assisting these households to cope with economic uncertainties. Moreover, policies that encourage savings and the accumulation of productive assets can serve as a cushion against future shocks. Recognizing the variations in the effects of price volatility among different households, the study suggests the need for policies and strategies that are specifically designed to address the uncertainties in the tea market. This implies a nuanced approach to policies that address the diverse needs and vulnerabilities of tea-producing households
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    Aid Fragmentation and Development Outcomes in Sub-Saharan African Countries
    (African Economic Research Consortium, 2024-02-02) Dedehouanou, Sessinou Erick Abel
    This study examined the fragmentation of official development assistance (ODA) in Sub-Saharan African countries and the role played by development outcomes. Initially, it analyzed the fragmentation of aid over the period 2000 to 2019 using the Theil index. On the donor side, it appears that fragmentation of aid from bilateral Development Assistance Committee (DAC) donors and bilateral non-DAC donors has decreased significantly in recent years. In addition, the aid provided by bilateral DAC donors has been less fragmented than that given by non-DAC bilateral donors. Several traditional donors and so-called emerging donors have contributed to the fragmentation of aid in Sub-Saharan African countries. As for aid recipients, the countries of Southern Africa or those belonging to the group of so-called fragile states have suffered less from aid fragmentation than their counterparts in Central, East, and West Africa, and those belonging to the group of non-fragile states. We used an instrumental variables method and a panel quantile regression with non-additive fixed effect to assess the effect of the development factors on aid fragmentation. The results obtained validated that the fragmentation of aid can be reduced by better coordination of aid at the sectoral level, and above all, by internal development factors (structural transformation policies and equity in the use of resources). Indeed, no solution to the fragmentation of aid is possible without the implementation of structural policies to achieve a level of development capable of coordinating the action of donors and equity in the use of resources allowing the satisfaction of the needs of various social groups
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    Health is Wealth: The Impact of Health Insurance on Multidimensional Poverty in Ethiopia
    (African Economic Research Consortium, 2024-02-02) Haile, Kaleab K.
    While previous empirical studies extensively examined the determinants of households’ health insurance (HI) uptake, little has been done to evaluate the accompanying impacts on household welfare and poverty incidence. This study bridges the existing gap in literature by examining the impact of HI on multidimensional household poverty. The data comes from the latest wave of the Ethiopia Socio-economic Survey (ESS) collected in 2018/19. The study uses propensity score matching and inverse probability weighted regression adjustment to even out the distribution of observed characteristics across purchasers and non-purchasers of HI. As these methods could not address simultaneity and self-selection biases, the study uses the endogeneous switching analysis, which integrates HI uptake and multidimensional household poverty equations, considering the interdependencies among the equations and their relationships with relevant observed household characteristics. The results reveal that households’ uptake of HI significantly reduces their probability of being multidimensionally poor. Moreover, the heterogeneous impact assessments of this study show that the desired impact of HI is more pronounced among male-headed households, households with a majority of adult male members, and households in urban areas. This study sheds light on the role of universal health coverage through HI as a policy instrument in the fight against multidimensional deprivations in the context of Sub-Saharan Africa.
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    An Empirical Analysis of the Interaction between Monetary Policy and Commercial Bank Lending in Nigeria
    (African Economic Research Consortium, 2024-02-02) Emekaraonye, Chukwunenye Ferguson; Dick, Emmanuel Ikechukwu; Agu, Chukwuma
    Using a recursive structural vector autoregressive model and quarterly data from 1986Q1 to 2019Q4, this study examines the transmission mechanism from monetary policy instruments, specifically the monetary policy rate, base money and nominal exchange rate, to outcome variables (prices and credit to the private sector) in Nigeria. The data showed structural breaks in 2004Q2, 2009Q3 and 2014Q3, which coincided with the 2004 banking consolidation, the 2009 Sanusi-led regulatory measures and the appointment of Godwin Emefiele as the Governor of the Central Bank of Nigeria in 2014. Accordingly, policy instrument transmission tests were conducted along three scenarios – 2004, 2009 and 2014 – to evaluate the changes that might have been imposed on the policy transmission mechanism by the reforms. Under the 2004 consolidation scenario, the reforms strengthened only the interest rate anchor (monetary policy rate), causing it to be effective in influencing credit to the private sector (CPS). Innovations in other monetary policy instruments led to insignificant responses in the outcome variables. Even base money, which previously impacted both prices and credit to the private sector, became insignificant and ineffective after 2004. Sanusi’s regime did not strengthen the impact of any of the monetary policy instruments on prices and credit to the private sector. Base money, which impacted outcome variables in some periods before 2009, became insignificant thereafter.Similarly, the 2014 development and sectoral support programmes under Emefiele also did not strengthen monetary policy instruments. Overall, the study affirms the position that monetary policy reforms may not always strengthen policy instruments to regulate or influence prices and credit to the private sector, especially when the transmission is indirect.
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    Financial Inclusion and Resilience to COVID-19 Economic Shocks in Nigeria
    (African Economic Research Consortium, 2023-12-13) Adeniran, Adedeji P.; Muthinja, Moses M.
    We examine the role of financial inclusion, ownership of bank accounts, and previous use of formal financial saving facilities as a resilience factor in the effect of COVID-19 on households' welfare in Nigeria. Using a novel data set that tracks food security among families in Nigeria before and during COVID-19, we find a negative effect of COVID-19 on welfare. The impact is more severe among male-headed households, those living in the southern region of Nigeria, and lower educated households. We also test how financial inclusion mitigates this effect through a triple difference analysis in which the households that are financially included and in non-agricultural sector are considered the treatment group. Financial inclusion did not support resilience to shock among non-agricultural homes. Given the magnitude and multisectoral dimension of the COVID-19 shock, financial inclusion was not enough to mitigate the effect. This, therefore, points to a role for stronger government support in a large shock like COVID-19.