Monetary Economics


Recent Submissions

Now showing 1 - 5 of 18
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    Water Use and Agricultural Productivity Growth in Sub-Saharan Africa
    (African Economic Research Consortium, 2023-08) Yannick, Djoumessi Fosso; Bergaly, Kamdem Cyrille Bergaly
    Today, we are confronted with one of the greatest challenges of the 21st century: meeting the increasing needs of the population while reducing the damage caused by agriculture to the natural resources, namely water and land. Water is a complex resource, unlike a stable resource over human lifetime, such as land. To date, the empirical literature on the estimation of productivity in agriculture has disregarded water as an input. Given that it constitutes a necessary input, then its efficient use becomes a prerequisite condition. The main objective of this study was to investigate productivity growth in agriculture in sub-Saharan Africa, taking into account water as an input. The true-random Stochastic Production Frontier (SPF) was used to estimate the agricultural production function incorporating water as an input and to derive the total factor productivity (TFP) using a sample of 19 countries for the period 1991–2014. The results of the SFA model showed that the classical coefficients of the production function, including water endowment as an input, have a significant and positive impact on agricultural production growth after correction for the potential endogeneity bias. The average growth rate of TFP taking into account water as an input was estimated at 0.045% per year for the full sample period, a figure considerably lower than classical TFP estimated at an average rate of 1% per year. For the period 1991–2001, the rate was negative and estimated at -0.44% and 0.36% for the period 2002–2012. The higher performance in 2002–2012 may be due to the significant adoption of good agricultural practices along with technological advances that allowed for saving water (between -0.08% and -0.05% on average per year). Therefore it would be advisable to focus more on good practices in water saving, which are key to efficient use of water in agriculture.
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    The Role of Energy Price Shocks in the Transmission of Monetary Policy in an Inflation Targeting Country: The Case of Ghana
    (African Economic Research Consortium, 2022) Harvey, Simon K.; Walley, Bernard J.
    Energy inflation has become more volatile and has evolved independently of other components of headline inflation over the years. Therefore, the use of one Phillips curve to capture short-run inflation dynamics may be inadequate in terms of helping the monetary policy authorities to determine the appropriate path of the monetary policy rate. In particular, such an approach may introduce noise into the model system, making it difficult to get reliable forecasts for inflation. We extend the existing New Keynesian model to include separate Phillips curves for energy inflation and non energy inflation. This approach would help the monetary policy authority in Ghana to gain a deeper understanding of how shocks to energy prices affect inflation, thereby leading to informed decisions about the appropriate path of the monetary policy rate in Ghana. We also incorporate a fiscal block to capture the effects of fiscal deficits on inflation in Ghana. We use the extended model to study the transmission mechanisms of the real economy, and of the exchange rate. This analysis allows us to understand the importance of these shocks in explaining inflation developments in Ghana and their implications for monetary policy. The results are mixed, indicating that isolating energy price from the rest of prices in the CPI basket does not necessarily improve the forecasts of the key macroeconomic variables, and will therefore not necessarily lead to better policy outcomes.
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    Poverty in Togo between 2006 and 2011: Accounting for Differences in Poverty Rates and the Role of Economic Growth
    (African Economic Research Consortium, 2022-06) Yao Nukunu, Golo
    As is the case of other countries, Togo committed itself, at the Millennium Summit, to halving poverty rates by 2015. Despite the efforts Togo has made to this end, poverty levels remain high in the country as evidenced by the high poverty rate of 57.8% in 2011. This slow pace in poverty reduction raises the issue of how well the poverty phenomenon is understood in Togo. To contribute to a better understanding of the situation, this study sought to explain the strong disparities that exist between rural and urban areas and shed light on the contribution of economic growth and income redistribution to the poverty phenomenon. The study uses data obtained from the surveys conducted in Togo in 2006 and 2011 using the Questionnaire on the Basic Indicators of Well-being (Questionnaire Unifié des Indicateurs de Base du Bien-être, QUIBB). It followed the methodological approach used by Shorrocks (1999) to analyse economic growth and income redistribution, and that used by Blinder-Oaxaca (1973) to account for the differences in poverty rates between rural and urban areas. The study analyses growth and redistribution between the two reference years, and shows that strong economic growth is needed for any significant reduction in poverty to occur. However, growth has to be complemented with pro-poor redistribution policies. The poverty differences observed between Togo’s rural and urban areas are accounted for by disparities in the resources available for the two areas. This suggests that, since they are essential for poverty reduction, government interventions aimed at increasing the quantity of such resources in the rural areas should be given greater priority than those aimed at improving their quality.
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    Inflation Dynamics in Zambia
    (2022-04) Chipili, Jonathan M.
    This study assesses the drivers of overall inflation in Zambia over the period 1994q1- 2019q4. A single-error correction model is used in which the underlying determinants of both food and non-food components of inflation as well as supply constraints are incorporated in the overall inflation equation. The empirical results show that, in the long-run, the sources of overall inflation are determined in the external sector market where the exchange rate and world non-food prices drive domestic prices. In the short-run, overall inflation is influenced by the depreciation of the Kwacha, increases in energy prices, imported inflation from South Africa, and increases in maize prices (supply constraints). Overall inflation exhibits persistence and seasonality. Further, the two sub-components of inflation display different characteristic behavior. This underscores the importance of employing a disaggregated approach in modelling inflation to improve information content and policy response. Three policy lessons can be drawn from these empirical results. Firstly, the dominant influence of the exchange rate on overall inflation and its sub-components requires a firm policy strategy to maintain stability in the exchange rate. Secondly, expanding and diversifying the manufacturing base to limit the current high dependence on imports of final consumer and capital goods from South Africa should be prioritised. Finally, the role of supply shocks—evident in the impact of maize prices on inflation—necessitates immediate significant reforms in the agriculture sector to boost productivity through the use of modern techniques such as irrigation in order to reduce dependence on rain fed practices.
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    Banks and Monetary Policy Transmission in the West African Economic and Monetary Union
    (African Economic Research Consortium, 2021-11-25) Kanga, Désiré; Kanga, Désiré
    This paper aims at examining the role of banks in the transmission of the monetary policy in the West African Economic and Monetary Union (WAEMU). By using a simple theoretical model, this paper shows that improving the quality of institutions and an increase in competition strengthens the transmission of monetary policy while capital requirement behaves like an additional cost to the borrowers. Applying a dynamic panel estimator to a large sample of WAEMU banks, the paper finds that bank lending is sensitive to monetary policy and capital-constrained banks reduce further their lending following a tight monetary policy compared to less capital-constrained banks. Moreover, an improvement in the quality of institutions seems to strengthen the transmission of monetary policy.