The Role of Institutional Quality and Financial Development in Economic Growth in Sub-Saharan Africa – Linear and Non-linear Analysis with Structural Breaks

Author: Eunice A. Adu-Darko

Article history:
Received: 20 April, 2022
Accepted: 5 May, 2024

Read More

 

Abstract (Click Here for Abstract)

This paper explores both linear and non-linear impacts that institutional quality and financial development may have on the economic growth process in the sub-Saharan African region. Annual data from 1984 to 2019 from 28 sub-Saharan African countries was used. Established on the Solow neoclassical theory, we employ the Cobb-Douglas production function to assess the linear relationship; and the Constant Elasticity of Substitution (CES) to investigate a possible non-linear relationship. To prevent model misspecification and increase the power of the regressions, we apply panel cointegration tools that build in cross-sectional dependency and structural breaks. Our investigations expose significant positive relationships among economic growth, institutional quality, financial development, and capital for the 28 sub-Saharan African countries in the long run as long as structural breaks and cross-sectional dependence are taken into account. The impact of financial development enhanced by institutional quality on economic growth is positive and significant when structural breaks are considered for the Cobb-Douglas function. In the case of the CES function, the significantly positive impact is only present for financial development. Important policy implications on effective measures that stimulate economic growth in sub-Saharan Africa are derived from this study.

Institutional Quality, Financial Development, Economic Growth, Structural Breaks, Sub-Saharan Africa, Cobb-Douglas Function, Constant Elasticity of Substitution Function

Cultural Alienation Through the Lens of Development

Author: Guy Pierre Kabemba Luembe

Article history:
Received:22 Nov 2022
Accepted:Dec 11, 2023

Read More

 

Abstract (Click Here for Abstract)

Studying cultural alienation and development is important for understanding the meaning and the implications of cultural alienation for development. The problem is to set an integrated framework for apprehending the two notions in terms of coexisting divergent cultures within a same society and development of human societies. As method, to elucidate the coexistence of divergent cultures within a society, the African tradition has been retraced from 4236 BCE to date and compared to the transplanted and enforced capitalist system, regarding the typical socio-economic agents and the rule of wealth concentration. Meanwhile, an analysis framework of culture and development has been set in terms of criteria (or conditions) of development, satisfaction of basic needs, social priorities and the integrity of culture. Then, the learnings of the aforementioned comparison of systems has been addressed within this analysis framework. In addition to its known negative effect on satisfaction, as results, first, cultural alienation traduces into erratic social priorities and needs satisfaction. Second, cultural alienation implies the perversion of the criteria of development and thus the perversion of development. These results are significant because erratic priorities may impede efficiency of resources mobilization and allocation. In addition, solving cultural alienation problem is essential to engage contemporary Black Africa in its appropriate course of development. About solutions to cultural alienation, some of them are approached in light of the aforementioned analytical framework.

Cultural conflict; Cultural integrity; Development criteria; Erratic satisfaction; Equations of satisfaction; General History of Africa; Social complexity

Are Exchange Rate, Interest Rate, and Price level Pass-through to Stock Prices in Egypt Symmetric or Asymmetric?

Author: Heba E. Helmy

Article history:
Received: 29 June, 2023
Accepted: 09 February, 2024

Read More

 

Abstract (Click Here for Abstract)

This paper employs linear (ARDL) and nonlinear (NARDL) models to examine the short-run and long-run relationships between stock prices on one hand and each of the exchange rate, the interest rate and the price level in Egypt. Employing monthly time series variables from January 2000 until June 2022, the paper concludes that the exchange rate has a clear asymmetric impact on stock prices both in the short and long run. In the short run, the depreciation of the Egyptian currency (LE) has a very strong instantaneous impact in raising stock prices, in addition to a significant effect in raising stock prices in the long run. The opposite impacts do not materialize in the case of the appreciation of the LE. Results also revealed that there is a significant negative relation between the interest rate and stock prices in the short run, and between the inflation rate and stock prices in the long run. As the devaluation of the LE (which positively affects stock prices) was always a main cause behind inflation (which negatively affects stock prices), policymakers should consider, before devaluing the LE, the net cumulative effects of both variables on stock prices in the long run, especially since the magnitude of the negative impact of inflation exceedingly outweighs the positive impact of the devaluation on stock prices.

Exchange rate, Interest rate, Inflation rate, Stock prices, Asymmetry, NARDL, Egypt

Female Representation and Human Development in Africa: The Role of Institutional Quality

Author: Gifty Ewurama Enchill

Article history:
Received: 25 November 2022
Accepted: 21 November 2023

Read More

 

Abstract (Click Here for Abstract)

Research on female representation is gradually receiving empirical and policy interest at country and cross-country levels (Jetter & Parmeter, 2018; Kenny & Verge, 2016; Dreher Gehring & Klasen, 2015). Women’s participation at all decision-making levels is a human right and a significant social requirement for attaining equality, peace and democracy, sustainable development, and inclusive growth (Mlambo et al., 2019; Bouchama et al., 2018). Even though about half of the world’s population is women, only 26.1% of seats in parliament are held by women globally and 25% in Africa (IPU, 2021). This is attributable to the marginalization of women from the political sphere, often resulting from discriminatory laws and practices (see The Customary Law of Dahomey Article 27; Gabon 1972 Civil Code), attitudes, gender stereotypes, illiteracy, lack of access to healthcare, and the disproportionate effect of poverty on women (UN, 2011).

Female Representation, Women in Parliament, Women Ministers, Human Development, Africa

Secondary innovation and firm performance: A case study of JSE listed companies

Author: Jacques Totowa and Euphemia Godspower-Akpomiemie

Article history:
Received: 17 January, 2023
Accepted: 02 November, 2023

Read More

 

Abstract (Click Here for Abstract)

Companies are always on the lookout for means to improve their performance for the benefit of their shareholders and other interested parties. Literature has shown that innovation through research and development (R&D) can be a catalyst for the performance of a company. Unfortunately, not all companies are able to invest in R&D, especially in emerging markets such as South Africa. Instead, some acquire patents and licenses (secondary innovation) to achieve the same goals. This study uses generalized method of moment (GMM) approach on a data set of companies listed on the Johannesburg stock exchange (JSE) between 2007 and 2021, to ascertain the impact that secondary innovation has on the performance of JSE listed companies. Our results suggest that the acquisition of secondary innovation has a positive impact on JSE listed firm. However, we found evidence that the South African government policies in relation to innovation hampers the performance of JSE listed companies

Secondary Innovation, firms’ performance, South Africa

Weather derivatives as a risk management tool for maize farmers in South Africa

Author: J de Necker, JM Geyser, and AM Pretorius

Article history:
Received: 28 November, 2022
Accepted: 09 October, 2023

Read More

 

Abstract (Click Here for Abstract)

The study investigates the potential of weather derivatives to mitigate agricultural risk factors. Specifically, it examines the feasibility of rainfall options as a risk management tool in hedging yield risk for maize farmers in the North-Western Free State province of South Africa. The correlation between rainfall and crop yield is established by examining data on maize yield over a 20-year period. Results indicate that rainfall during January and February has the most significant impact on maize production. By using a Yield-at-Risk analysis, the study determines that a minimum rainfall level of 135mm during January and February is needed to ensure a good crop. The results show that rainfall options can be financially viable in South Africa, particularly in the water table region of the North-Western Free State. Although the study admits that farming profitability may not significantly improve, it shows that downside risk can be limited while still achieving a 30% profit on input costs, as offered by the region.

Weather Derivatives, Maize, Rainfall Options, Yield Risk, Crop Insurance, South Africa

Seigniorage transfer payments in the context of the Common Monetary Area (CMA)

Author: Jannie Rossouw

Article history:
Received: 18 April 2023
Accepted: 23 December 2023

Read More

 

Abstract (Click Here for Abstract)

This paper considers seigniorage and seigniorage transfer payments within the context of the Common Monetary Area (CMA), i.e., South Africa on the one hand, and eSwatini, Lesotho and Namibia on the other hand. Seigniorage generally makes reference to the income that accrues to the relevant issuer of currency in circulation (physical banknotes notes and coins in circulation), but the literature also elucidates other definitions. This aspect is considered in this paper. The CMA is a characteristic of Southern Africa that is often overlooked in the literature. The currencies of eSwatini, Lesotho and Namibia are pegged to the South African rand and rand transfers freely between the CMA partner countries. After assessing alternative definitions of seigniorage, this paper argues that, while the CMA-agreement provides for South Africa to pay seigniorage to eSwatini, Lesotho and Namibia, the seigniorage sharing agreement is too generous in favour of those countries, therefore including a component of development aid. It would be in South Africa’s best interest to report development aid in a transparent way, rather than to “hide” it as deemed or assumed seigniorage.

Banknotes, coin, currency, Common Monetary Area (CMA), eSwatini, Lesotho, Namibia, SA Reserve Bank, seigniorage, seigniorage transfer payments, South Africa

Investigating the Effects of Monetary Policy Shocks on Growth and Inflation in Egypt: Asymmetry and the Long-term Impact

Author: Nadeen Omar and Dina Yousri

Article history:
Received: Dec 12, 2022
Accepted: Dec 11, 2023

Read More

 

Abstract (Click Here for Abstract)

Egypt is an emerging economy that has been going through a series of monetary reforms since the 1990s. Previous studies examined the effects of monetary policy with the assumption of a symmetric impact on the macroeconomic aggregates. We add to this line of literature with a recent investigation of both the symmetric and asymmetric effects of monetary policy on output and inflation in Egypt. This paper utilized the interest rate as the monetary policy instrument and retrieved quarterly data covering the period from 2007Q3 to 2019Q3. We apply both the linear and non-linear Auto-regressive Distributed Lag (ARDL) model. In addition, the paper employs an F-bounds test for cointegration and derives the dynamic multiplier to visualize the asymmetric effects. Despite a significant long-run impact on both macroeconomic variables, there is evidence for asymmetric effects on inflation, but not on output. We conclude with policy implications reflecting on Egypt’s plans of implementing an inflation-targeting (IT) regime.

Asymmetric policy, cointegration, interest rate, inflation, non-linear ARDL (NARDL), monetary policy

Tax administrative environment and tax revenue collections: Evidence from Sub-Sahara Africa

Author: Joseph Olorunfemi Akande, Eukera Wealth, and Kuhepa Tjondu

Article history:
Received: 09 August, 2021
Accepted: 15 November, 2023

Read More

 

Abstract (Click Here for Abstract)

A perennial question in development economics is why fiscal revenues are consistently low in Africa. This study explores the role of tax administrative environment in explaining low-tax revenue collection in SSA region using unbalanced panel data (1991-2018) from 39 countries. A generalised Method of Moment (GMM) technique is used to analyse the data. The results reveal that the tax administrative environment influences tax revenue efforts differently, supporting the hypotheses that governance, economic, and political risks negatively impact tax revenue collection. The study has implications for ensuring an enabling environment if the current steps at increasing revenue through tax are to be productive. The realignment of tax efforts to the tax environment underscores the study’s originality.

: Tax revenue, governance risk, political risk, economic risk, Sub-Saharan Africa, generalised method of moments, tax administrative environment.

Relative Importance of Time, Country and Bank-specific Effects on Bank Performance: A Three-Level Hierarchical Approach

Author: Queen Magadi Mabe and Beatrice. D Simo-Kengne

Article history:
Received: May 16, 2023
Accepted: November 21, 2023

Read More

 

Abstract (Click Here for Abstract)

The present study employs the variance component model to assess the relative significance of time, firm, and country-specific factors in driving the performance fluctuations of 37 African banks over the period from 2004 to 2021. The findings indicate that time-specific factors hold greater explanatory power in elucidating variations in bank performance, followed by country-specific and bank-specific effects. Furthermore, the impact of various risk factors on bank performance is conducted, utilizing panel data estimation techniques. The study outcome is that explicit deposit insurance schemes demonstrate an adverse performance effect when implemented in conjunction with escalating leverage ratios. Consequently, it is recommended that deposit insurance schemes must be accompanied by a reduction in leverage ratios. Lastly, bank managers should closely monitor year-specific events as they account for a substantial portion of the observed performance variation.

bank performance, deposit insurance, and variance component models-hierarchical model

The role of tourism development in improving environmental quality in South Africa: Insights from novel dynamic ARDL simulations approach

Author: Maxwell Chukwudi Udeagha and Nicholas Ngepah

Article history:
Received: 24 May 2021
Accepted: 15 September 2023

Read More

 

Abstract (Click Here for Abstract)

One approach to tackling environmental problems and achieving environmental sustainability goals is to boost the tourism industry, but this paradigm is also contested. Using the recently developed novel dynamic autoregressive distributed lag (DARDL) simulations framework, this study evaluates the influence of tourism development in promoting environmental quality in South Africa from 1960 to 2020. The results demonstrate that: (i) the growth of the tourism industry reduces CO2 emissions over the short and long terms; (ii) the scale effect worsens ecological environment while the technique effect is ecologically friendly, supporting the environmental Kuznets curve (EKC) theory; (iii) trade openness strengthens ecological integrity in the short term but considerably intensifies environmental degradation over the long term; (iv) industrial production, foreign direct investment, economic complexity, and energy use increase CO2 emissions while composition effect reduces it; (v) tourism development, industrial growth, trade openness, foreign direct investment, energy use, economic complexity index, composition effect, technique effect and scale effect Granger-cause CO2 emissions in the short, long and medium term. These findings raise important policy questions.

tourism development, trade openness, CO2 emissions, dynamic ARDL simulations, energy consumption, industrial value-added, South Africa

Ecological Imperialism, Development, and the Capitalist World-System: Cases from Africa and Asia, Mariko Lin Frame 2022, Routledge, ISBN 9780367204105 (Hardcopy), 224 pp

Author: Alizee Ville

Article history:

Read More

 

Abstract (Click Here for Abstract)

In her book Ecological Imperialism, Development, and the Capitalist World-System, Mariko Lin Frame, assistant professor of economics, attempts to demonstrate how the dynamics of the global economy are driving environmental degradation and perpetuating inequalities in the Global South. At a time where global disparities in raw material consumption continue to widen despite decades of development policies, and the per capita annual consumption in the USA (30 tons), Europe (20 tons), and Africa (5 tons) is staggeringly diverging, Frame argues for a closer examination of how the Global South’s dependent position has been reinforced through changes in the neoliberal development policies relating to international trade, investment, and finance. By deepening theoretical linkages between Ecologically Unequal Exchange and Ecological Imperialism (the topic of her doctoral dissertation), Frame demonstrates the political economy behind this expansion, through compelling case studies from Africa and Asia, revealing that below the most striking aspects of this ecological imperialism, such as open-air mining and large-scale plantations, lay the historical and financial infrastructures which drive this extractivism. 



Foreign Direct Investment by Emerging Market Multinationals in Africa: Impact on Domestic Capital Formation

Author: Zelealem Yiheyis, Emmanuel Cleeve and Valeria Andreoni

Article history:
Received: 20 May 2022
Accepted: 10 May, 2023

Read More

 

Abstract (Click Here for Abstract)

Foreign direct investment (FDI) flows within developing countries are rising. This article investigates whether FDI from emerging markets (EM) contributed to the domestic capital formation in Africa and how this compares to flows from developed countries. Fixed-effect estimates, based on panel data drawn from African countries covering the 2001-2012 period, suggest that total FDI and FDI from developed countries exerted favourable short-run and cumulative effects on total gross fixed capital formation (GFCF). We find that the effect of FDI from BRICS is significantly positive at least in the short run, while the average effect of FDI from other developing and transition economies is neutral. The indirect evidence of the crowding-in effect on private domestic investment by local enterprises is mixed. The results point to the relevance of the quality of institutions and extractive-sector activity in host economies as mediating factors between FDI and GFCF.

Africa; Emerging Markets; Foreign Direct Investment; Gross Fixed Capital Formation

Are Children From Financially Included Households Less Likely to Work?

Author: Sylvanus Gaku

Article history:
Received: 10 July, 2022
Accepted 10 May, 2023

Read More

 

Abstract (Click Here for Abstract)

Several factors including poverty, productivity shocks, labor market imperfections and parental education account for the incidence of child labour. However, little is known about the impact of financial inclusion on children’s propensity to work in the Ghanaian context. Using ordinary least squares and instrumental variable regressions, this study quantifies the effect of household financial inclusion on the tendency of children to work. This study finds that children from financially included households are less likely to work compared to their counterparts in financially excluded households. This negative and statistically significant link between financial inclusion and children’s tendency to work becomes strong after assuaging endogeneity concerns.

child labour, poverty, IV regression, financial inclusion

The Competitiveness of Nigeria’s Exports: Does the Choice of Exchange Rate Regime Matter?

Author: Adamu Waziri Babagana

Article history:
Received: 26 November, 2021
Accepted: 14 February, 2023

Read More

 

Abstract (Click Here for Abstract)

This study examines the extent to which the exchange rate regime affect the competitiveness of exports in Nigeria between 1987 to 2019. The study employed the Auto Regressive Distributed Lag (ARDL) model to assess the short-run and long-run changes in competitiveness in response to the exchange rate regimes implemented and other explanatory variables. The findings reveal that a flexible exchange rate regime causes a significant decline in export competitiveness. While there is a positive proportionate change in competitiveness in relation to trade openness and inflation, an increase in international oil prices has a negative short-run impact on competitiveness. The study identified exchange rate regimes and oil price increases as the two channels through which both currency depreciation and appreciation could adversely affect export competitiveness. The implication of this finding is that when there are sudden oil windfalls, policymakers should resist the temptation to absorb all the petrodollars domestically to prevent a sharp appreciation of the naira that will cause ‘Dutch disease’ and erode competitiveness. The study also suggests that policymakers should emphasize exchange rate stability by adopting de facto intermediate exchange rate regimes which ensures the stability of the exchange rate within a limited band and close the wide gap between official and parallel market exchange rates.

Export competitiveness, Exchange rate regime, Nigeria

Impact of Loan Portfolio Characteristics on Microfinance Institutions: The Case of Morocco

Author: Tahar Harkat, Samir Aguenaou, Jawad Abrache and Zakaria Ez-zarzari

Article history:
Received: 08 August, 2022
Accepted: 10 May, 2023

Read More

 

Abstract (Click Here for Abstract)

This paper identifies how loan portfolio characteristics impact the financial performance and sustainability of Moroccan microfinance institutions (MFIs). Using the Mix Market dataset, fixed and random panel regression models were adopted to analyze six Moroccan MFIs between 2003 and 2018. These models analyze the impact of loan portfolio size, type, risk, return, management effectiveness, write-offs, and recoveries variables on MFIs’ return on asset (ROA), return on equity (ROE), and operational self-sufficiency (OSS). As a set of proxy variables is used to measure each loan portfolio characteristic, empirical findings indicate that the nature of the relationships between these variables and the dependent variables varies. Findings indicate that MFIs’ profitability and sustainability are positively impacted by many variables that include the number of outstanding loans, gross loan portfolio for enterprise financing, and portfolio at risk 90. Results also reveal that the dependent variables are negatively impacted by variables, which include write-offs, the number of borrowers per staff member, and the number of loans per loan officer.

Microfinance institutions, Panel Regression, Loan Portfolio, Morocco

The Moderating Roles of The Internal and External Corporate Governance Mechanisms on The Performance of Non-Financial Listed Firms in Nigeria

Author: Iwora Godfrey Agara and Lesley Stainbank

Article history:
Received: 10 July, 2022
Accepted: 10 May, 2023

Read More

 

Abstract (Click Here for Abstract)

This study extends the growing body of research that explores the relationship between corporate governance compliance and the performance of the firm by examining the Nigerian context with respect to the listed non-financial firms from 2012 to 2019. This study developed the first unique NCGCI of listed non-financial firms from 2012 to 2019, using 32 internal and external corporate governance mechanisms which were based on the combined corporate governance provisions of the Nigerian Code of 2011, the Companies and Allied Matters Act (CAMA) of 1990, and extant literature. In contrast to existing Nigerian findings, and using both the compliance index and the equilibrium variable models with the fixed effects panel estimation method, we argue that compliance with corporate governance codes does not necessarily lead to better performance by listed non-financial firms. Specifically, there was a negative but insignificant relationship between the NCGCI and the independent variables. Further, the CEO non-duality and female board membership indicated a significant but negative relationship with NAT, Tobin’s Q and ROE. However, the market share indicated a significant positive relationship with ROE. The frequency of board meetings indicated a negative and significant relationship with NAT only. The gender diversity was significant but negatively associated with Tobin’s Q and NAT and not with ROE. The study motivates the need to base corporate governance frameworks on the peculiarities of the firm, industrial sector and country.

agency theory; corporate governance; Nigeria; Tobin’s Q; ROE; NAT; non-financial; firms; fixed-effect; multivariate-regression; quantitative research, compliance index, equilibrium variable model.

Fundamental Sources of Risk in Frontier Equity Markets

Author: Wycliffe Nduga Ouma

Article history:
Received: 10 June, 2022
Accepted: 10 May, 2023

Read More

 

Abstract (Click Here for Abstract)

Asset pricing has attracted innumerable attention from many stakeholders in capital markets. However, a considerable lack of consensus exists regarding the full list and identity of risk factors and the ability of the already studied risk factors to optimally price risk. This problem is pronounced in frontier equity markets due to the unpredictability of the underlying risk fundamentals. We highlight that frontier equity markets are largely characterised by market frictions that misalign with the established asset pricing fundamentals, thereby complicating risk pricing using the existing frameworks. Other confounding factors include sizeable downside risk, stale prices, acute illiquidity, and unstable macroeconomic fundamentals. This study is based on these constraints. Using monthly data on a list of 16 macroeconomic variables from 20 countries between January 1996 and February 2020, we arrived at interesting results at a country level and in a combined sample. At the country level, the results were mixed. However, a pooled sample of the 20 markets revealed the existence of some commonalities among both domestic and global macroeconomic factors. The empirical evaluation using both Fama and MacBeth (1973) two-step and GMM regressions established that unanticipated inflation (UI), market-wide volatility (VOL), market liquidity (LIQ), consumer confidence index (CC), trade-weighted US dollar exchange rates (TW$) and VIX volatility index (VX) were not only significant drivers of risk variations but also priced in the returns of frontier equity markets. Given these results and the increased investor attention to these markets, a favourable policy environment is needed to accelerate capital market development and investment in these countries.

Equity risk premia; Risk factors; Frontier markets

Smooth Transitioning Growth in Malawi: The Role of Economic Policy

Author: Ronald Mangani

Article history:
Received: 20 April, 2022
Accepted: 5 May, 2023

Read More

 

Abstract (Click Here for Abstract)

Malawi adopted orthodox neoliberal economic policies in 1981 to replace Keynesian-based demand management, developmental state, and protectionist policies. However, the sub-period from 2004 to 2012 witnessed some reversion to elements of the pre-liberalisation period. This paper analyses the response of the Malawian economy to the critical economic policy shifts experienced since 1960. A smooth transition regression (STR) model is estimated to explain the country’s real output, setting its trend as the threshold variable. Augmenting the model with proxies for labour and capital is found to be unrewarding, but the heuristically determined logistic STR model fits the data well. The transition process is subsequently used to explain the response of economic growth to policy changes. We find that Malawi’s growth did not transition until after 2004, and the change was practically fully accomplished by 2011. Real output growth was significantly faster during this transition period. The findings of this study imply that the appropriateness of orthodox neoliberal economic policies is questionable in Malawi. This should motivate astute policy-makers seeking to adopt post-neoliberal economic management policies, mutatis mutandis.

Economic policy, economic growth, smooth transition regression

Analysis of Factors Affecting the Performance of Moroccan Exports

Author: Tahar Harkat, Samir Aguenaou, Jawad Abrache, and Anas Saoudi

Article history:
Received: 04 August, 2022
Accepted: 12 December, 2022

Read More

 

Abstract (Click Here for Abstract)

This study uses the autoregressive distributed lag (ARDL) technique and the error correction model (ECM) to investigate the long-run and short-run associations between export performance and macroeconomic variables in Morocco. These macroeconomic variables are GDP growth, real effective exchange rate (REER), consumer price index (CPI), foreign direct investments (FDI), and gross capital formation (GCF). Using data that covers the period between 1990 and 2020, empirical results support a negative long-run association between exports and REER, and a negative long-run relationship between exports and CPI. At a 10% significance level, results also support a positive long-term relationship between exports, FDI, and GCF. The results derived from the ECM model suggest that the short associations are between exports and GCF at a 5% significance level, and between exports and REER at a 10% significance level, which accounts for a positive coefficient and a negative one, respectively. The findings reveal insightful policy implications to enhance Moroccan exports through controlling REER, encouraging foreign investments, and enhancing GCF.

Exports performance, Morocco, ARDL, ECM, Macroeconomic variables

Verifying the Tunisian exchange regime stability in the post-revolution period by state-space models and high-frequency data

Author: Mohamed Bouabidi

Article history:
Received: 10 November, 2021
Accepted: 13 July, 2022

Read More

 

Abstract (Click Here for Abstract)

The 2010-2019 period was marked by a steady depreciation of the Tunisian Dinar (TND) against the two major international currencies: a depreciation rate of 95% against the United States Dollar (USD) and 63% against the euro (EUR). To examine whether this depreciation is caused by a discrete manipulation of the de facto exchange regime and exchange rate or a natural result of the supply and demand fundamentals under a floating regime, this study applies the State-Space Model technique to daily data because it serves to check whether the weights are time-varying or stagnant. The results show that the steady depreciation of the TND cannot be exclusively attributed to market forces. The de facto regime is crawl-like with implicit time-varying weights that have opposite trends, except in 2017. The TND is implicitly anchored to the two major currencies and the monetary authorities intervene to modulate and moderate its fluctuation. These findings may be important to anticipate the future exchange rate trend; develop an effective hedging strategy; or examine the effect of external shocks and economic fundamentals changes on the exchange rate evolution.

Exchange Rate, de Facto Regime, State Space Model, Depreciation, Fear of Floating.

From Speculation to Survival Technique - The Role of Bitcoin in Different Economic Circumstances Based on the Analysis of Selected African Countries

Author: Agata Klibe and Katarzyna Swierczynska

Article history:
Received: 13 February, 2022
Accepted: 7 March, 2023

Read More

 

Abstract (Click Here for Abstract)

The article aims to reveal that the relationship of the bitcoin-derived exchange rate with the inflation level in a crisis-driven economy allows the citizens to use bitcoin as a “survival” asset. We analyse data on bitcoin transactions in local currencies of selected African economies (Ghana, Kenya, Nigeria, and South Africa) up to January 2021. Based on the bitcoin data, we derive the unofficial exchange rate for each country and compare it to the official one. We show that in countries of high inflation, the discrepancies between the two rates may be so high that it is impossible to establish even a long-term relationship between them. Moreover, the difference between the monthly-averaged bitcoin-derived and official rate positively relates to inflation in the same month. It suggests that the citizens may utilise bitcoin money-like properties to overcome the consequences of high inflation, buying bitcoin for local money and selling for US dollars instead of using the direct exchange rate or simply using bitcoin to store their wealth.

bitcoin; Africa; money; exchange rate; inflation

COVID-19 and Trade in Zimbabwe: An Auto-Regressive Distributed Lag (ARDL) Analysis

Author: Regret Sunge

Article history:
Received: 22 Aug 2021
Accepted: 01 Dec 2022

Read More

 

Abstract (Click Here for Abstract)

This study examined the impact of COVID-19 pandemic on trade in Zimbabwe for the period 03/2020 to 06/2022. The pandemic necessitated the enforcement of lockdown measures. Prudent as they are, they brought several socio-economic problems. However, during this period, trade outperformed the previous comparable period. This motivated the current study which provides a novel contribution to the impact of COVID-19 in Zimbabwe. The current study is the first to provide an econometric COVID-19 impact analysis, let alone on trade in Zimbabwe. The auto-regressive-distributed-lag (ARDL) estimation technique was used to analyze the relationship. The headline result is that the COVID-19 pandemic had an unfavorable impact on total trade and exports and a favorable impact on imports. The impact was bigger and more significant on imports than exports. This suggested expenditure switching from foreign to locally produced goods. The results provide a case for revamping the import substitution industrialization approach. Specifically, the government should support firms producing import-substituting goods. To avoid failures of previous ISI approaches, the focus should be on reducing import dependency through increasing local firms’ productivity and competitiveness through value-addition and beneficiation. Furthermore, it is time for Zimbabwe to penetrate emerging foreign markets. This can be done by export incentive schemes such as favorable export surrender requirements and (2) simpler import and export procedures. Also, the private sector needs to (1) glocalise (attracting foreign investment towards local production) and (2) enhance value addition and beneficiation to produce high-end goods that are currently exported as raw materials and/or semi-finished.

COVID-19; Trade; Exports, Imports, Lockdown; ARDL

Top