Showing papers in "African Development Review in 2021"

COVID-19 and food prices in sub-Saharan Africa.

Abstract: This study investigated the impact of the novel coronavirus disease 2019 (COVID-19) outbreak on prices of maize, sorghum, imported rice and local rice in sub-Saharan Africa (SSA). We estimated dynamic panel data models with controls for macroeconomic setting using general method of moments estimation. The study found that the COVID-19 outbreak led to increases in food prices of the sampled countries. Restrictions on movements or lockdowns in the wake of COVID-19 was associated with an increase in the price of maize only. We also found that exchange rate, inflation and crude oil prices exerted a detrimental effect on food prices. We recommend that governments of SSA countries invest in infrastructure that improves efficiencies in the food supply chain during pandemics. Providing adequate support to industries in the value chain will also improve food availability and food price stability post-COVID-19.

Trade openness, FDI, and income inequality: Evidence from sub‐Saharan Africa

Abstract: The motivation for this study stems from the United Nations Sustainable Development Goals (UN‐SDGs) and their impact by 2030. The UN highlights 17 SDGs that address pertinent local and global issues, one of which—SDG‐10—has been devoted to reducing inequality. This study investigates the nexus between trade openness, foreign direct investment (FDI), and income inequality in sub‐Saharan Africa using panel data from 2000 to 2015 and the generalized method of moment (GMM) technique approach. The findings show that FDI and income have a negative, statistically significant relationship with income inequality, signifying that as FDI and income per capita increase, the level of income inequality decreases. However, trade openness, education, political stability, corruption, and rule of law have a positive, statistically significant relationship with inequality. This study, therefore, offers some recommendations that will help policymakers. First, develop good policies to attract more foreign investors, which will contribute to creating employment opportunities in the region. Second, create more infrastructures to provide good quality education. Third, implement a good policy to motivate local production which will contribute to creating jobs. Fourth, build a strong institution(s) to fight against corruption.

Household food security and the COVID-19 pandemic in Nigeria

Abstract: Pivotal to human development and the sustainable development goals is food security, which remains of substantial concern globally and in Nigeria, particularly during the COVID-19 pandemic despite various palliatives and intervention initiatives launched to improve household welfare. This study examined the food security status of households during the pandemic and investigated its determinants using the COVID-19 National Longitudinal Phone Survey (COVID-19 NLPS). In analysing the data, descriptive statistics, bivariate as well as multivariate analysis were employed. Findings from the descriptive statistics showed that only 12% of the households were food secure, 5% were mildly food insecure, 24.5% were moderately food insecure and over half of the households (58.5%) experienced severe food insecurity. The result from the ordered probit regression identified socioeconomic variables (education, income and wealth status) as the main determinants of food security during the pandemic. This study indicates that over two-thirds of households were threatened by food insecurity in Nigeria. The finding indicates the gross inadequacy of government palliative support and distribution. Thus, regarding policy implication, interventions and palliatives should be well planned and consistent with household size and needs.

Online and face-to-face learning: Evidence from students’ performance during the Covid-19 pandemic

Abstract: This study investigates the factors that predict students' performance after transitioning from face-to-face to online learning as a result of the Covid-19 pandemic It uses students' responses from survey questions and the difference in the average assessment grades between pre-lockdown and post-lockdown at a South African university We find that students' performance was positively associated with good wifi access, relative to using mobile internet data We also observe lower academic performance for students who found transitioning to online difficult and who expressed a preference for self-study (i e reading through class slides and notes) over assisted study (i e joining live lectures or watching recorded lectures) The findings suggest that improving digital infrastructure and reducing the cost of internet access may be necessary for mitigating the impact of the Covid-19 pandemic on education outcomes

The nexus between tourism, financial development, and economic growth: Evidence from African countries

Abstract: This paper examines the nexus between tourism, financial development and economic growth in 31 African countries using the Dumitrescu–Hurlin Granger non‐causality test that accounts for heterogeneity and cross‐sectional dependence. It also employs the Granger causality test in the frequency domain that distinguishes between temporary and permanent causality for the country‐specific analysis. It shows a cointegration relationship between tourism, financial development and economic growth. It reveals a joint long‐run causality from tourism and financial development to economic growth, and a joint short‐run and long‐run causality from tourism and economic growth to financial development, albeit the joint causality from financial development and economic growth to tourism is tenuous. The individual causality shows a bidirectional causality between tourism and economic growth, between financial development and economic growth, and between tourism and financial development. The country‐specific analysis reveals that tourism is a significant predictor of financial development and economic growth at high frequency rather than at low frequency in most countries. Therefore, African countries should prioritize the policies and programs that can facilitate the development of the tourism and financial sectors in their quest to accelerate economic growth and development.

Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels

Abstract: This paper examines the nonlinear impact of real GDP per capita on financial development in a panel of 125 countries. It also determines the moderating effect of inflation on the impact of GDP on financial development. It employs the dynamic panel system generalized method of moments (GMM) and the dynamic common correlated effects (CCE) to do both panel and country‐specific analysis, as well as control for cross‐sectional dependence, heterogeneity and endogeneity. This study shows that GDP has a positive impact on financial development in the entire panel. However, when we split the panel into different income groups, we find a positive impact in the high‐ and middle‐income groups while the impact is insignificant in the low income group. Although we find no evidence of a nonlinear impact of GDP on financial development in the panel, the country‐specific analysis reveals a significant nonlinear relationship between GDP and financial development in 73 countries. We also show that inflation adversely moderates the positive impact of GDP on financial development in middle‐income countries. This study implies that the relationship between GDP and financial development depends on the levels of GDP and inflation rate. We recommend some policy options based on the findings.

The short-term economywide impacts of COVID-19 in Africa: Insights from Ethiopia

Abstract: The COVID-19 impact on the global economy combined with partial lockdown measures in Ethiopia represents a large, unprecedented shock to the country's economy The social accounting matrix (SAM) multiplier model, built on the most up-to-date SAM (2017) for Ethiopia, shows that the country suffered a 14 3% loss in GDP (Birr 43 5 billion or US$1 9 billion) during the lockdown period compared to the no-COVID case during the same period Nearly two-thirds of the losses come from the services sector Although no direct restrictions were imposed on the agriculture sector, which is the primary means of livelihood for most, the sector faces a 4 7% loss in output due to its linkages with the rest of the economy We find dissimilar income and poverty effects across households by income quintile and level of urbanization The study also considers two recovery scenarios and generates relevant insights on the potential impacts of COVID-19 by the end of 2020 The earmarked relief and recovery plan resources can only help the economy to recover if targeted in an efficient way towards sectors most affected by COVID-19, and further resources are mobilized to support strategic sectors?those with the highest economywide multiplier effects?and vulnerable communities

Breaking the carbon curse: The role of financial development in facilitating low-carbon and sustainable development in Algeria

Abstract: This paper investigates the oil resource abundance and environmental quality nexus in Algeria, with emphasis on the role of oil export receipts and domestic oil consumption, and whether financial development is a policy option for reducing carbon dioxide (CO2) emissions in the economy. Using time series data from 1971 to 2016, the Bayer–Hanck test for cointegration confirms the presence of a long‐run equilibrium relationship among the variables. Further analyses based on the auto‐regressive distributed lag (ARDL) model, fully modified least square (FMOLS), dynamic ordinary least square (DOLS), canonical cointegration regression (CCR) and Granger causality based on the vector error correction model (VECM) confirm the oil resource abundance curse in Algeria via the impact of domestic oil consumption on environmental quality. The estimates also show that financial development reduces CO2 emissions and has both short‐run and long‐run causal impact on economic growth. Thus, deepening financial sector development can be instrumental for achieving a low‐carbon and sustainable economy in Algeria.

The adverse impact of the Covid-19 pandemic on the labor market in Cameroon.

Abstract: This paper analyzes the impacts of the Covid-19 pandemic on employment in Cameroon. Using data collected from a rapid survey led by the National Institute of Statistics, on a sample of 1,310 respondents from April to May 2020. These data show that a large proportion of workers suffered a wage cut (60.93%) and temporary job suspension (31.6%), and the smallest proportion suffered job loss (7.47%). The results of the logistic regression show that lower frequency of outgoings to work, difficulties in accessing transport services and the loss of customer confidence have a strong negative impact on both wage cuts and temporary suspensions of work. The closure (total or partial) of activities has increasingly enhanced job loss. Further, the log of odds show that workers in private firms are more affected than their peers in public firms, and the middle-aged are the most affected group. So, it is recommended to revamp the old methods of activity into digital innovation that enables less physical touch and find an appropriate way to support those who have lost their jobs during this Covid-19 pandemic, particularly in the private sector.

The effects of foreign aid, foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities

Abstract: This paper examines the relationship between foreign aid (AID), foreign direct investment (FDI) and domestic investment (DI) and its effects on economic growth in 41 African countries. Annual panel data from 1990 to 2016 are examined using fixed‐effects (FE) and system‐GMM estimators. We test the existence of nonlinearities and complementarities in the relationship between AID–FDI, AID–DI, FDI–DI, and AID–FDI–DI. Empirical results confirm the existence of a nonlinear relationship between AID, FDI, DI, and economic growth. Besides, the results show that AID and FDI have a significant positive complementing effect on economic growth. It is shown also that FDI complements DI, while the coupled effect of AID and DI remains weak in catalyzing growth. Moreover, the results indicate that the complementarity between AID–FDI–DI positively influence economic growth, revealing that AID and FDI work as a complement factor to DI and enhance its effectiveness in promoting economic growth. These insights have important policy implications. Policy‐makers in African countries are well advised to implement concrete policy measures suitable for building on the growth momentum created by foreign capital inflows, like FDI, AID as well as remittance.

The impacts of the Covid-19 pandemic on employment in Cameroon: A general equilibrium analysis

Abstract: This paper presents a computable general equilibrium (CGE) model that assesses the impacts of the Covid-19 pandemic on different economic sectors in Cameroon A special feature of the CGE model used in this study is that it accounts for the importance of the informal sector in Cameroon Indeed, more than 80% of the employed work in the informal sector, which is characterized by the precariousness and instability of income and employment over time and space Simulation results suggest that economic sectors such as construction, education, hotels and restaurants and commerce should receive special attention, as they have experienced the most severe employments losses This calls for a differentiated support from the government to protect employment in these industries

‘Not a good time’: Assessing the economic impact of COVID‐19 in Africa using a macro‐micro simulation approach

Abstract: The paper studies the effects of the coronavirus disease 2019 (COVID-19) pandemic on African economies and household welfare using a top-down sequential macro-micro simulation approach. The pandemic is modeled as a supply shock that disrupts economic activities of African countries and then affects households' consumption behavior, the level of their welfare, and businesses' investment decisions. The macroeconomic dynamic general equilibrium model is calibrated to account for informality, a key feature of African economies. We find that COVID-19 could diminish employment in the formal and informal sectors and contract consumption of non-savers and, especially, savers. These contractions would lead to an economic recession in Africa and widen both fiscal and current account deficits. Extreme poverty is expected to increase further in Africa, in particular if the welfare of the poorest households grows at lower rates. We also use the macroeconomic model to analyze the effects of different fiscal policy responses to the COVID-19 pandemic.

COVID-19 policy responses, inflation and spillover effects in the West African Economic and Monetary Union

Abstract: This paper contributes to the emerging literature on the socioeconomic impacts of the coronavirus disease 2019 (COVID-19) pandemic by using a panel fixed effects model for estimating the impact of government policy responses to the pandemic and their spillover effects on the consumer price index for West African Economic and Monetary Union (WAEMU) countries over the period January 2019?July 2020. Across various robustness checks, the OLS and IV regressions provide three major pieces of evidence. First, the COVID-19 confirmed cases positively affect the consumer price index while the overall government policy responses index has a negative impact on the consumer price index. Second, we find that government accommodative policies to COVID-19 in other countries has a positive and statistically significant impact on the host country's consumer price index. Finally, the findings indicate that world food prices and oil prices positively affect the consumer price index. These results suggest that policymakers may consider intensifying the implementation of public policies in response to the pandemic for preserving the stability of prices when the sanitary situation of the COVID-19 deteriorates. While confirming that international prices are among the key drivers of inflation in WAEMU countries, our findings also reiterate the importance of regional cooperation and coordination for fighting the adverse socioeconomic impacts of the COVID-19 pandemic.

Revisiting the nexus between domestic investment, foreign direct investment and external debt in SSA countries: PMG-ARDL approach

Abstract: This paper investigates the short‐ and long‐run effects of external debt and foreign direct investment (FDI) on domestic investment in sub‐Saharan Africa (SSA) from 1990 to 2017. We employ the pooled mean group ARDL technique and panel Granger causality test to attain the objectives of the study. The result indicates that FDI exerts a positive and statistically significant effect on domestic investment in the short run whereas external debt has an insignificant negative effect. In the long run, the result shows that external debt and FDI have a crowding out effect on domestic investment in SSA. Equally, a circular unidirectional link is found among the variables from domestic investment to FDI, FDI to external debt, and from external debt to domestic investment. We recommend that SSA countries should channel external debt to productive sectors like road infrastructures and energy, control corruption and improve the business environment to attract both domestic and foreign investors.

Financial inclusion and entrepreneurship willingness of youth: Evidence from Mali

Abstract: This study examines the determinants of youth financial inclusion and its impacts on their willingness to become entrepreneurs in Mali. The World Bank's Global Findex database is used to perform Logit estimations and propensity score matching. We find that the financial inclusion of youth seems to be more determined by the attainment of a high level of education, employment status, living in a wealthy family, and having at least one family member with a bank account. Three factors appear as barriers to better financial inclusion of youth: the cost of financial services, the lack of money, and the perception that financial services, savings in particular, are not a necessity. The study also shows that savings and loans have a statistically significant impact on the willingness to engage in entrepreneurial activity, even in the agricultural sector. Particularly for young people, providing them with loan services seems to have more impact than other financial services on the desire to undertake agri‐entrepreneurial activity. The study recommends the strengthening of public policies aimed at expanding credit to youth because of its high impact on their willingness to engage in entrepreneurship in general and in agri‐preneurship in particular in Mali.

Does board gender diversity matter in the banking sector? Evidence from Tunisia

Abstract: The purpose of this paper is to investigate the effects of board gender diversity on banks’ performance and risk for the case of a developing African country. Our sample includes a unique data set of Tunisian banks during the period 2005–2018. We use the two‐way cluster regression proposed by Petersen. This approach corrects for the unobserved firm effect (time‐series dependence) and time effect (cross‐sectional dependence). It gives robust standard errors adjusted for heteroscedasticity, serial correlation, and cross‐sectional correlation. Our results support a positive relationship between gender diversity and banks’ performance measured by ROA and ROE, while women board members are associated with more default risk measured by Z‐score. Our results remain robust to various measures of gender diversity, banks’ performance and risk. The findings contribute to the literature by providing empirical evidence from Tunisia, an African emerging economy, where the examination of the role of board gender diversity on bank governance is unexplored.

The long-run relationship between ODA, growth and governance: An application of FMOLS and DOLS approaches

Abstract: Africa has been received an important amount of foreign aid for several decades; however, it is among the poorest regions in the world. This study examines the relationship between foreign aid, economic growth and governance in the African region for the period of 1996-2014. On fully applying both technique DOLS and FMOLS. In the first stage of this study, we examine the effet of foreign aid on economic growth. In the second stage, we assess the intermediary role of institutions in the relationship between Foreign aid and economic growth in African countries. It was found that Foreign aid has a negative effect on economic growth in African countries in both of FMOLS and DOLS models. However, empirical results indicate that foreign aid improves in terms of economic growth in the presence of good institution quality only in DOLS model.

Potentials of the African Continental Free Trade Area: A combined partial and general equilibrium modeling assessment for Central Africa

Abstract: This study evaluates the potential impacts of the implementation of the African Continental Free Trade Area's (AfCFTA) tariff modalities on tax revenues, industrial production, trade flows, welfare and consumption for seven central African countries. Drawing on data from member states and the Global Trade Analysis Project (GTAP) database, two methodologies are applied in the study. Computable general equilibrium (CGE) and partial equilibrium (PE) are used to evaluate the long‐ and short‐term effects respectively. The results show that the reduction in tariff barriers provided by the AfCFTA will lead to a decrease in tariff revenue in some Central African countries in the short term. However, in the long term, these losses remain largely offset by the socio‐economic benefit issues generated by the implementation of the agreement, particularly in terms of economic growth and the well‐being of the region's population. To cub these revenue deficits, this paper encourages Central African countries to ratify and implement the AfCFTA. Also, they should diligently adopt all necessary reforms that could help reap the potential long‐term gains.

Effets de la COVID-19 sur la variation du revenu et la sécurité alimentaire des ménages au Togo

Abstract: Resume L'objectif de ce papier est d'analyser les effets de la COVID-19 sur la variation des revenus, la modification de la consommation alimentaire et les strategies d'adaptations des menages au Togo. Pour se faire, les modeles probit et logit multinomiale ont ete utilises en se basant sur des donnees collectees aupres de 1405 menages dans 44 districts des 6 regions sanitaires. Les resultats revelent que les menages dans lesquels le chef a perdu son emploi sont plus exposes a une baisse de revenu et donc a une reduction de leur consommation alimentaire pendant la pandemie. Toutefois, les transferts monetaires octroyes aux personnes vulnerables ont un effet positif, mais non significatif sur le changement de leur revenu. Par ailleurs, les menages beneficiaires de prestations sociales au sein desquels le chef a un niveau d'education superieur, sont plus susceptibles de supporter les effets de la pandemie. Ainsi, pour les menages ayant ressenti un effet modere ou severe de la crise, la probabilite est elevee qu'ils diminuent leur consommation alimentaire. A cet effet, il serait interessant d'etendre les prestations sociales aux acteurs du secteur informel et d'accelerer la mise en place du registre social unique pour un meilleur ciblage des menages vulnerables.

Do remittances moderate financial development–informality nexus in North Africa?

Abstract: The prevalent informality and sheer size of international remittances characterize the North African countries. This study primarily aims at investigating how remittances moderate the effects of financial development on the informal economy in North African countries. Employing pool mean group (PMG)/panel ARDL approach and a balanced panel data set over the period 1980–2015, we find that remittances moderate the negative relationship between financial development and informal economy. This finding suggests that remittances bolster financial development, which, in turn, decreases the informal economy. Based on this result, we recommend that tailored policies and interventions are needed to promote financial development and international remittances in the North African region.

Impact of bilateral investment treaties on foreign direct investment in Africa

Abstract: Africa continues to face several challenges that make its share of global foreign direct investment (FDI) to be infinitesimal. These include the prevalence of fragmented investment policies, information asymmetry and high sovereign risk. Bilateral investment treaties (BITs) can help overcome some of these encumbrances by signalling the host country's willingness to protect FDIs. This study hypothesizes that BITs can play an augmentation role and investigates their impact on FDI attraction using data across 48 African countries from 2000 to 2018. In contrast to the previous theoretical and most empirical literature, results based on the two‐step systems generalized method of moments (GMM) show that ratified BITs do not perform a significant role in FDI attraction. Nonetheless, the additional analyses allowed us to make some rather non‐trivial conclusions about the possible effects of BITs concluded with France on FDI. The study recommends that countries should participate in some BITs, although governments need to be cautious when tying their hands with BITs because of susceptibility to damaging litigations that sometimes follow, irrespective of the less than commensurate benefits.

Household-level poverty, consumption poverty thresholds, income inequality and quality of lives in sub-Saharan Africa

Abstract: Poverty and income inequality are the twin greatest menaces in sub‐Saharan Africa (SSA) with significant prevalence. This study decomposed their significance and probabilities in determining the quality of life (QOL) of individuals and households in SSA while controlling for household demographics. The household‐level poverty (HLP) index and the indexes for QOL indicators were constructed from the national demographic and health surveys (DHS) for SSA countries. Data on consumption poverty thresholds and income inequality are from the global consumption and income project (GCIP) over 1985–2015. Findings reveal that, while the HLP index elicits more rural poverty across regions, consumption poverty thresholds are more urbanized and persistent across regions, except for Central Africa. The results for income inequality were found to be Gini −0.4396 and Atkinson index −0.4437, and more urbanized across regions. Furthermore, we found that SSA has made giant strides towards achieving sustainable development goals (SDGs) 6 and 3 but no information on the quality of healthcare. However, abysmal likelihoods exist for SDGs 4, 7 and 8 in SSA. Similarly, abysmal probabilities were also found for households’ access to adequate housing, a good environment and insurance coverage. Indeed, SDG‐4 is more significant for achieving SDG‐8. HLP stand as a significant bottleneck to achieving SDG‐7 and adequate housing, while income inequality mars SDG‐3 targets and sustainable environmental conditions in SSA. Policy options are discussed.

Does government education expenditure affect educational outcomes? New evidence from sub-Saharan African countries

Abstract: The human capital crisis, reflected in the weak global competitiveness of African education, has questioned the effectiveness of public spending in increasing educational outcomes on the continent. Thus, this article examines the impact of government education expenditure on educational outcomes in 31 sub‐Saharan African (SSA) countries from 2000 to 2019 based on a generalized method of moments (GMM). The study sheds light on the priorities of government education spending on the continent. Findings showed that the effect of government education spending on educational outcomes in SSA was driven by the measure of educational outcome used. Government spending in Africa had focused mainly on primary and secondary education to the detriment of tertiary education because it is convenient and generates political gains. Due to institutional rigidities that emanate from the governance structure, the inequitable allocation of government funding had made higher education in Africa less responsive to the changes in global knowledge and labour market demands. Therefore, the following policy agenda becomes imperative in SSA: (i) government education spending should equitably target all education levels to improve the aggregate human capital development indicators in the region; (ii) there is a need to enhance government institutions' capacity to increase their level of effectiveness and performance.