Diversification as a panacea for commodity price volatility in sub-Saharan Africa

2020 ◽  
pp. 340-350
Author(s):  
Degol Hailu ◽  
Chinpihoi Kipgen
Keyword(s):  
Manufacturing Sector ◽  
Price Volatility ◽  
Commodity Price ◽  
Sub Saharan Africa ◽  
Sovereign Wealth Funds ◽  
Long Run ◽  
Commodity Price Volatility ◽  
Short Run ◽  
Sub Saharan ◽  
Current Price

The prices of hydrocarbons and minerals are subject to severe fluctuations. As a result, commodity dependent countries in sub-Saharan Africa face serious fiscal and balance-of-payment deficits. In the short run, countries respond by changing output levels, withdrawing from sovereign wealth funds, drawing-down reserves, reducing public expenditure, scaling up domestic resource mobilization, and seeking external borrowing. However, all these options have serious drawbacks. In the long run, diversification of sources for tax and foreign exchange is the only viable solution. For instance, in commodity dependent countries, the manufacturing sector contributes 7 per cent of GDP, compared to 13 per cent in other resource dependent economies in Latin America, the Caribbean, and Asia. The current price shock presents yet another opportunity to embark on economic diversification strategies.

scholarly journals Implications of Governance, Natural Resources, and Security Threats on Economic Development: Evidence from Sub-Saharan Africa

2021 ◽  
Vol 18 (12) ◽  
pp. 6236
Author(s):  
Husam Rjoub ◽  
Chuka Uzoma Ifediora ◽  
Jamiu Adetola Odugbesan ◽  
Benneth Chiemelie Iloka ◽  
João Xavier Rita ◽  
...  
Keyword(s):  
Economic Development ◽  
Natural Resources ◽  
Causal Effect ◽  
Sub Saharan Africa ◽  
Security Threats ◽  
African Countries ◽  
Significance Level ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan

Sub-Saharan African countries are known to be bedeviled with some challenges hindering the economic development. Meanwhile, some of these issues have not been exhaustively investigated in the context of the region. Thus, this study aimed at investigating the implications of government effectiveness, availability of natural resources, and security threats on the regions’ economic development. Yearly data, spanning from 2007 to 2020, was converted from low frequency (yearly) to high frequency (quarterly) and utilized. Data analysis was conducted using Dynamic heterogeneous panel level estimators (PMG and CS-ARDL). Findings show that while PMG estimator confirms a long-run causal effect of governance, natural resources, and security threats on economic development, only natural resources show a short-run causal effect with economic development, while the CS-ARDL (model 2) confirms the significance of all the variables both in the long and short-run. Moreover, the ECT coefficients for both models were found to be statistically significant at less than 1% significance level, which indicates that the systems return back to equilibrium in case of a shock that causes disequilibrium, and in addition, reveals a stable long-run cointegration among the variables in the model. Finally, this study suggests that the policy makers in SSA countries should place more emphasis on improving governance, managing security challenges, and effectively utilizing rents from the natural resources, as all these have severe implications for the economic development of the region if not addressed.

scholarly journals Long-Run and Short-Run Effects of Trade Openness on Life Quality in Sub-Saharan Africa

2021 ◽  
Vol 11 (8) ◽  
pp. 72-83
Author(s):  
Guivis Zeufack Nkemgha ◽  
Aimée Viviane Mbita ◽  
Symphorin Engone Mve ◽  
Rodrigue Tchoffo
Keyword(s):  
Trade Openness ◽  
Life Quality ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
French Colonies ◽  
Sub Saharan ◽  
British Colonies

This paper contributes to the understanding of the other neglected effects of trade openness by analysing how it affects life quality in sub-Saharan African countries over the period 2000–2016. We used two trade openness indicators, namely: Squalli and Wilson index and the rate of trade. The empirical evidence is based on a pooled mean group approach. With two panels differentiated by their colonial origin, the following findings are established: the trade openness variable measured by Squalli and Wilson index has no effect on life quality in the both groups of countries in the short-run. However, it has a positive and significant effect on life quality in the both group of countries in the long-run. The use of the rate of trade confirms the results in the both groups of countries in the long-run. The contribution of trade openness to life quality is 3.27 and 5.19 times higher in the Former British Colonies than that recorded in the Former French Colonies of SSA respectively to the use of Squalli and Wilson index and the rate of trade. Overall, we find strong evidence supporting the view that trade openness promotes life quality in SSA countries in the long run.

scholarly journals Deconstructing the Impact of Entrepreneurship on Income Inequality in Sub-Saharan Africa Countries

2020 ◽  
Vol 34 (1) ◽  
pp. 273-284
Author(s):  
Jimoh S. Ogede
Keyword(s):  
Income Inequality ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Macroeconomic Factors ◽  
Significance Level ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan ◽  
Entrepreneurial Activities ◽  
The Impact

Abstract The study examines the impacts of entrepreneurship on income inequality in a panel of 29 Sub-Saharan African countries spanning from 2004 to 2020. The paper employs a dynamic heterogeneous panel approach to differentiate between long-run and short-run impacts of entrepreneurship on income inequality. The findings establish a robust and direct nexus between entrepreneurial activities and income disparity. The results of the two entrepreneurial indicators are stable. Besides, the coefficient of the human capital is positive in the regression and statistically significant at a 5 percent significance level. The proxies for macroeconomic factors exhibit diverse signs and impact, which suggest a policy stimulus aimed at refining macroeconomic situations and also ignite prospects for households to increase their incomes.

scholarly journals The Dynamic Impact of Public External Debt on Capital Formation in Sub-Saharan Africa: The Pooled Mean Group Approach

2021 ◽  
Vol 3 (4) ◽  
pp. 144-157
Author(s):  
Chukwunenye N Kocha ◽  
Marshal Iwedi ◽  
James Sarakiri
Keyword(s):  
External Debt ◽  
Capital Formation ◽  
Debt Service ◽  
Sub Saharan Africa ◽  
Interest Payment ◽  
Debt Sustainability ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan

The increasing reliance on public external debt stocks in Africa and other developing countries has raised the question of debt sustainability, especially in the face of Covid-19, which has forced many counties (both developed and developing) into an unforeseen and unplanned recession. This study contributes to the literature on debt sustainability by examining the effect of public debt on capital formation in Sub-Saharan Africa (SSA) from 2000 to 2008 using the pooled mean group estimation approach. The debt variables considered are external debt stock, debt service on external debt, and interest payment on external debt. Consistent with the overhang theory, our results show that increasing external debt stock and interest payment on external debts only have a marginal impact on capital formation in the short run and exerts a serious negative effect in the long run. Our results also show that debt service burden has a positive effect on gross fixed capital formation in the long run. Therefore, we argue that despite being faced with a huge debt service burden resulting from large external debt stock, SSA countries are not neglecting investments in critical infrastructures needed to drive economic growth. However, we recommend that increasing government revenue base, minimizing economic waste associated with public expenditure, and intensifying negotiations for debt relief may be a plausible way out.

scholarly journals Analysis of Savings-Investment Gap in Sub-Saharan Africa: Does the nexus between Foreign Remittances and Domestic Financial Sector matter?

2021 ◽  
Author(s):  
Oluwatosin Adeniyi ◽  
Joshua Ogunjimi ◽  
Wasiu Adekunle ◽  
Musibau Babatunde ◽  
Edward Omiwale
Keyword(s):  
Financial Development ◽  
Migrant Workers ◽  
Forecast Accuracy ◽  
Sub Saharan Africa ◽  
Interactive Effects ◽  
Panel Ardl ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan

Abstract In recent times, increasing attention is being paid to examine the developmental impact of remittances inflow, particularly due to the emergence of remittances as the fastest growing source of capital flows for developing countries. To this end, we contribute to the literature by analyzing the interactive effects of remittances and financial development on savings-investment gap for a panel of 18 Sub-Saharan African (SSA) countries over the period of 1990 to 2017. Our Panel ARDL model estimation showed that higher remittances have significant reducing effect on savings-investment gap in the long run, and this becomes magnified while accounting for individual and interactive effects of remittances and financial development. We also uncovered the widening effects of rising real GDP growth and bank deposits over a long-term horizon, whereas higher private sector credit widens the savings-investment gap only in the short-run. Meanwhile, liquid liabilities have no significant effect on savings-investment gap both in the short run and long run. We further offered evidence on the complementarity and substitutability effects of remittances and financial development over the short-term and long-term horizons, respectively. We also demonstrated the superior forecast accuracy of the predictive savings-investment gap model - that accounts for both individual and interactive effects - over other specifications, and this is robust to the choice of financial development indicators, samples and forecast horizons. Our results underscore the urgent need for a reduction of transfer costs, so as to encourage both migrant workers and their beneficiaries to make use of the official channels for sending and receiving remittances in the region.

Foreign aid and economic growth in sub-Saharan Africa

2019 ◽  
Vol 11 (1) ◽  
pp. 147-168 ◽  
Author(s):  
Nihar Ranjan Jena ◽  
Narayan Sethi
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Sub Saharan Africa ◽  
Cointegration Test ◽  
Modeling Framework ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan ◽  
The Impact

Purpose The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the sub-Saharan Africa (SSA) region from 1993 to 2017. Design/methodology/approach A sample of 45 SSA countries for the period 1993–2017 is considered for this study. The study uses various econometrics tools such as Pedroni and Kao’s cointegration test, Johansen-Fisher Panel cointegration test, FMOLS and PDOLS in order to ascertain the long-run and short-run dynamics among the variables under consideration. Findings The empirical results find that long-run and short-run relationships exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the SSA economies. The authors also find unidirectional causality running from foreign aid to economic growth. The policymakers in these countries are well-advised to implement suitable policy measures to build on the growth momentum created by foreign aid inflows. Originality/value The study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in the SSA region. Taking into account the diversity of level of growth experienced by the 45 countries in the region, the study uses an appropriate regression technique, i.e., panel dynamic OLS whose results are robust. The finding is also supported by the Granger-causality test and robust cointegration techniques.

Does Globalisation Promote Economic Output in Sub-Saharan Africa? Evidence from Bootstrap ARDL Model

2021 ◽  
pp. 002190962199085
Author(s):  
Huiping Dong ◽  
Yifei Cai ◽  
Xing Shi
Keyword(s):  
Sub Saharan Africa ◽  
African Countries ◽  
Economic Output ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Lag Model ◽  
Sub Saharan

This study aims to investigate whether globalisation promotes economic output in Sub-Saharan African countries in both the short run and the long run. Based on the latest version of the KOF globalisation index, we employ a newly developed bootstrap autoregressive distributed lag model to analyse this question. Compared to the traditional autoregressive distributed lag model, which ignores the degenerate cases, the new approach could avoid spurious cointegration. Results show that globalisation and economic output are positively correlated for most Sub-Saharan African countries, while the causal effect cannot be concluded except for a couple of exceptions. This finding implies that globalisation cannot guarantee an increase in economic output in the long run for most Sub-Saharan African countries. The Granger causality test shows that globalisation leads to economic output for Burundi, Gabon, Rwanda, Senegal and Zambia in the short run. Conversely, economic output leads to globalisation for Burkina Faso, Cameroon, Ghana, Kenya and Senegal. For Senegal, globalisation and economic output mutually determine each other and therefore form a positive spiral development path. Policymakers should be aware of the specific features of different economies in making sound globalisation policies to avoid the underlying adverse effects of global integration.

scholarly journals Budget Deficit and Economic Growth in Sub-Saharan Africa: A PMG Approach

2020 ◽  
pp. 1-10
Author(s):  
Gbenga Oladapo Awolaja ◽  
Ikponmwosa Osagie Esefo
Keyword(s):  
Economic Growth ◽  
Significant Relationship ◽  
Budget Deficit ◽  
Estimation Method ◽  
Sub Saharan Africa ◽  
Policy Makers ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan

The relationship between budget deficit and economic growth remains one of the widely debated topics among policy makers and economists in both developed and developing countries of the world. This paper empirically investigated the long run and short run relationship between budget deficit and economic growth in sub-Saharan Africa countries from 1991 to 2018 using Panel data for twenty (20) sub-Saharan Africa Countries. The estimation technique employed in the study was the Pooled Mean Group (PMG) estimation method and the regression results revealed that in the long run, budget deficit has a negative and significant relationship with economic growth whereas in the short run, it has a positive and significant relationship with economic growth. The study concluded that government should reduce the overall recurrent expenditure as it will help to mitigate the problem of budget deficit that leads to debt accumulation in sub-Saharan Africa countries and increase expenditure on developmental projects.

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