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- ItemOrder Flow-Based Microstructure Analysis of the Spot Exchange Rate in Zambia(African Economic Research Consortium, 2024-05-13) Phiri, Sydney Chauwa; Chisha, Keegan; Chipili, Jonathan M.Traditional macroeconomic fundamentals have challenges in explaining nominal exchange rate movements at short horizons partly due to their inability to capture expectations. Using data from the Bank of Zambia, and an order flow-based microstructure model within a vector autoregressive (VAR) framework, this study establishes that order flows in the foreign exchange market in Zambia contain useful information in explaining daily exchange rate movements for the period 2016‒2020. Daily order flows of four out of 18 different customer types are found to contain information content with the interbank, manufacturing, households, as well as wholesale and retail being the most important. Cross-market order flows contain less information to explain daily movements in the kwacha/US dollar exchange rate. The policy lesson from the empirical results points to the central bank paying attention to the demand requirements by the four identified segments of the foreign exchange market that can potentially drive up the exchange rate and generate inflationary pressures.
- ItemAnalysing the Relationship between Innovation and Productivity: A Case Study of Senegalese Manufacturing Industries(African Economic Research Consortium, 2024-05-13) Kane, AboubacryThe objective of this study was to profile innovative companies and to examine the link between innovation and productivity in manufacturing firms in Senegal. It took into account the interaction between various forms of innovation. Using a descriptive analysis of variance (ANOVA) approach and multivariate regression, the study found that although Senegal had a satisfactory level of technology adoption, an innovation deficit remained in the industrial sector, notably in research and development (R&D) activities. The study established that larger enterprises and firms that export their products are the most innovative. However, no significant relationship was found between the gender of the manager of the firm and the adoption of various forms of innovation. Furthermore, our results demonstrate that the choice to adopt innovation in an organization is positively related to improved labour productivity. In regard to the other types of innovation, no association was found. Our results suggest the need to develop strategies that integrate innovation in industrial policy in order to facilitate its adoption. They also suggest the need to undertake regular surveys of innovation in firms so as to better understand market trends, identify their strengths and weaknesses and facilitate decision making in terms of innovation.
- ItemSudanese External Debt: Sustainability Analysis and Prospects for Solutions(African Economic Research Consortium, 2024-05-06) Hag, Mohammed GebrailThis study aims to analyse Sudan’s debt sustainability and suggests practical solutions for its external debt crisis. To this end, the study applies descriptive statistics methods to secondary data. The empirical results of a debt sustainability analysis point out that Sudan remains in debt distress as all its external debt burden ratios remain well above their respective indicative thresholds. Consequently, this study introduces three scenarios for solving the Sudanese debt crisis. The first is full or partial debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative. The second scenario is repaying all external debt through the establishment of a so-called “oil revenue fund” to serve Sudanese external debt in collaboration with South Sudan. The study also suggests debt division between Sudan and South Sudan as a last resort. The study shows that Sudan faces an external debt burden ranging from US$7.96 billion (financial capacity weighted) to US$31.6 billion (geographical method weighted). By comparison, South Sudan’s debt burden ranges between US$8.2 billion (geographical method weighted) and US$31.84 billion (financial capacity weighted). Additionally, the study suggests that each country bears an additional US$4.2 billion as their share of the interest accumulation of the debt stock upon the separation of South Sudan, which amounted to US$39.8 billion. Several policy implications emerge from the study that could help policy makers in the two countries, and key creditors, be more strategic in addressing the issue in a way that accommodates common interests.
- ItemThe Distributional Impacts of Public Expenditure in Ethiopia: A Gender-Lens Analysis(African Economic Research Consortium, 2024-05-06) Tesfaye, WondimagegnThis study investigates the gendered distributional impacts of public expenditure policy using survey and administrative data from Ethiopia. It specifically assesses the progressivity and pro-poorness and poverty, and inequality impact of cash and in-kind transfers, through a gender-lens analysis. The study employs an expenditure incidence analysis approach based on the Commitment to Equity (CEQ) methodology to determine whether government expenditures redistribute resources to the poor. The findings of the study provide evidence that government social spending has significant welfare impacts, although some of the social services are poorly targeted. Among the public spending instruments studied, primary education spending and productive safety net programme (PSNP) transfers tend to be the most progressive, and tertiary education spending appears to be the least progressive. The benefits associated with public health spending are also less progressive. The results have important policy implications for public spending policy reforms, poverty reduction and income redistribution.
- ItemDo Natural Resource Endowments Affect Export Diversification in Africa? A Cross-Country Analysis(African Economic Research Consortium, 2024-04-30) Niass, DieynabaThis paper aims to analyse the effect of natural resources on the supply portfolio of African exports. Based on COMTRADE data on export products from 2000–2015, a methodological approach is applied using two standard measurement trade diversification indicators: active line counting and the standardised Herfindahl Hirschman index. These indicators are then linked to the status of resource-rich countries (and other controls) in a fixed-effects panel data model. The results of this paper suggest that the presence of oil resources (non-renewable resources) hurts diversification, essentially through the channel of degradation of institutions. Similarly, agricultural products (renewable resources) negatively affect African export diversification (count and index) through the exchange rate channel. This shows the need for Africa to strengthen the quality of institutions by fighting against corruption through transparency in the exploitation and export of natural resources, and through proper management. In addition, African countries must ensure the stability of monetary policies so that a depreciation of the exchange rate can be to their advantage.