AERC Working Paper Series
Permanent URI for this collection
Browse
Recent Submissions
Now showing 1 - 5 of 89
- PublicationIs the Exchange Rate a Shock Absorber or a Source of Shocks? Evidence from South Africa(AERC, 2026) Trust R. MpofuThis paper investigates empirically whether the exchange rate in South Africa acted as a shock absorber or a source of shocks over the period 2000Q2-2019Q4 using the data sourced from the IMF’s IFS and FRED. Finding the answer to this question is important because South Africa’s exchange rate is more volatile relative to peers and such exchange rate fluctuations might be good or bad for the economy. The period of the study is to test the shock-absorbing properties of the flexible exchange rate regime following mixed empirical evidence. The study employs a Bayesian structural VAR using sign restrictions to identify supply, demand, and monetary shocks for a three-variable VAR, and supply, demand, monetary policy, and exchange rate shocks for a four-variable VAR. The results show that demand shocks explain most of the variance in the real exchange rate, while other shocks play a small role, which suggests that the exchange rate acted as a shock absorber. The results also show that demand shocks explain most of the variability in the prices. These results suggest that policymakers should monitor and stabilise fluctuations emanating from the demand side given the SARB’s mandate of price stability.
- PublicationClimate-Smart Agricultural Practices and Gender-Differentiated Food-Nutrition Outcomes: Empirical Evidence from Rural South Africa(AERC, 2026) Abeeb Babatunde Omotoso; Abiodun Olusola OmotayoClimate change significantly impacts rural households' dietary outcomes by reducing farm productivity and income, prompting farmers to adopt climate-smart agricultural practices (CSAP) to mitigate adverse effects. This study examines the impact of CSAP adoption on gender-differentiated food security outcomes proxied by the Household Food Insecurity Access Scale (HFIAS) and household dietary diversity score (HDDS) in rural South Africa. Using nationally representative survey data from a baseline assessment conducted in 2023 through the ClimapAfrica Programme, we employed a Multinomial Endogenous Switching Regression (MESR) model to address selection bias and estimate the effects of CSAP adoption on gender-differentiated HFIAS and HDDS. Results show that male-headed households (MHHs) exhibited lower HFIAS scores (11.25) and higher HDDS (9.22) than female-headed households (FHHs), indicating that FHHs experienced greater food insecurity and less dietary diversity. These differences are attributed to gender-based disparities in access to resources such as land, credit, and extension services, education, and off-farm income opportunities. Furthermore, CSAP adoption patterns vary significantly by gender, with MHHs more likely to fully adopt CSAPs (21%) compared to FHHs (11%), while FHHs exhibit higher rates of single adoption (28%) and non-adoption (15%). Additionally, factors influencing CSAP adoption include farm size, cooperative membership, education, and access to credit, with gender-specific variations. Notably, full CSAP adoption positively impacted HDDS and reduced HFIAS across genders, with MHHs experiencing greater gains. Partial and single adoptions also enhance dietary outcomes, albeit to a lesser extent, with MHHs benefiting more from partial adoption due to higher off-farm income and agricultural diversification. The results highlight that while CSAP adoption significantly improves food security, persistent gender disparities highlight the need for targeted interventions that enhance resource access and opportunities for FHHs, thereby fostering greater resilience and sustainable agricultural productivity under changing climatic conditions.
- PublicationWHEN THE LIGHTS GO OUT: POWER OUTAGE AND FIRM PERFORMANCE IN DEVELOPING COUNTRIES(AERC, 2026) Addisu A. LashitewSevere power outages are widespread in developing countries and can significantly undermine firm performance. This study examines their effects using data from the World Bank Enterprise Surveys (WBES), covering 63,200 manufacturing establishments across 121 developing countries between 2006 and 2019. The results indicate that power outages have different effects on firms that generate their own electricity and those that do not. In response to greater power outages, firms with in-house electricity generating capacity produce a larger share of their own electricity, and subsequently spend more on fuel expenses, but they fail to eliminate revenue losses from power outages. Analysis using difference-in-differences estimation further shows that the adverse effects of power outages are more pronounced in energy-intensive industries regardless of in-house power generation status. This effect is also greater among smaller firms than it is for medium and large enterprises. The results remain robust when alternative specifications are estimated that use different measures of power outage and energy intensity.
- PublicationWill Improved Financial and Digital Literacy Increase Financial Inclusion For All? Evidence From Sub-Saharan Africa.(AERC, 2026) Jacob Nunoo; Chei Bukari; Michael CoffieDespite rapid growth in digital financial services (DFS) supply, adoption across sub-Saharan Africa (SSA) remains low and unequal by gender and location. While existing research predominantly attributes this to demographic and socioeconomic factors, this paper proposes a complementary explanation: that deficits in digital literacy (DL) and financial literacy (FL) represent independent and underappreciated barriers to digital financial inclusion (DFI). Using data from the Financial Inclusion Insights (FII) Survey across Kenya, Nigeria, Tanzania, and Uganda, and employing two-stage least squares regression, dominance analysis, interaction analysis, and Blinder-Oaxaca decomposition, the study tests whether DL and FL independently drive DFI, whether their effects are complementary, and whether these effects extend beyond already-advantaged groups to women and rural dwellers. Three findings emerge. First, both DL and FL causally drive DFI beyond economic circumstances. DL’s effect is five times larger than FL’s (4.2 percentage points vs 22 percentage points), accounting for over 80 percent of explained DFI variance, with their joint effect exceeding individual contributions. Second, literacy effects are not concentrated among urban males: DL benefits women more than men (23.5 vs 21.4 percentage points), with the strongest joint effects among rural and female populations. Third, equalising DL endowments by gender would close 77 percent of the DFI gender gap; equalising by location would close 63 percent exceeding any other single factor. These findings reframe the policy debate: digital skills investment targeting women and rural communities is the most direct lever for inclusive DFI expansion in SSA.
- PublicationThe Effects of Remittances on Poverty in Nigeria(AERC, 2026) Babajide Fowowe; Mohammed ShuaibuThis study conducts an empirical investigation of the effects of remittances on poverty in Nigeria. We rely on a computable general equilibrium (CGE) model where policy scenarios that reflect changes in remittances are simulated, thereby making it possible to identify the impact of remittances on poverty. The results revealed that a negative remittance shock occasioned by the launching of the $300 million diaspora bonds by the Federal Government led to an increase in the level of poverty. Also, our results showed that the impact of a positive remittance shock through the reduction of remittance transaction costs led to a reduction in poverty. The effect was primarily transmitted through the income and consumption channels. The results underscore the crucial role of remittances in helping to smooth consumption and ameliorating poverty in Nigeria. Design appropriate policies that seek to facilitate the flow of remittances more reliably and at the lowest cost, develop remittances-related products (i.e., savings, insurance contributing to social protection for households), and foster access to financial and business services, thus stimulating the local economies. Thus, a set of key features that lead to cost-related inefficiencies, such as weak infrastructure, low competition, and financial regulation constraints, needs to be addressed. The study concludes that remittances cannot be exclusively relied upon for ameliorating poverty, rather it should be used to complement other programmes.