Driving Social Capital, Sectoral Development, Income Distribution and Banking Practices With Effective Policies to Achieve Economic Growth in African Economies

Paper Session

Sunday, Jan. 8, 2017 8:00 AM – 10:00 AM

Hyatt Regency Chicago, Ogden
Hosted By: African Finance and Economics Association
  • Chair: Bichaka Fayissa, African Finance and Economic Association

Empirical Evidence of Nonlinear Effects of Monetary Policy Reaction Functions in a Developing Country

Edward E. Ghartey
,
University of the West Indies

Abstract

The paper examines nonlinear effects of monetary policy reaction function using 1978-2015 annual sample with threshold autoregression (TAR) and traditional models to find out how Bank of Ghana (BOG) reacts to achieve its primary goals when inflation rate deepens. Estimating linear functions to capture temporary monetary policy reaction functions to assess reactions of Central Banks’ monetary policy, especially in developing countries, often suffer from serial correlation, heteroscedasticity and functional instability problems. We remedied these problems by using interest rate to minimize a quadratic nonlinear loss function to derive an asymmetric TAR model. We then identified logged price as the threshold variable, with one threshold value in a two inflation regimes from designated output and inflation threshold variables, and two threshold values in a three inflation regimes when exchange rate is included in the designated threshold variables. In all inflation regimes, the BOG responds to external account deficits, and in a low inflation regime, it responds to both inflation and output. In the moderate inflation regime, it responds to only output. In the high inflation regime, it responds to only inflation in the two inflation regimes, and to both output and depreciation in the three inflation regimes. Both Engle-Granger and asymmetric error correction estimates indicate that temporary deviations of interest rates from a long-run equilibrium are symmetrical, with the speed of adjustment being fast in the former, and in the latter case, where the negative phase of deviations is persistent and seems to be temporarily asymmetrical. Furthermore, both threshold and Engle-Granger cointegration tests are supported by Johansen cointegration tests. Thus, the symmetric policy response results in both short term and long-run are consistent with the central bank’s public stance of pursuing inflation targeting policy to reduce inflation, even though it is ineffective in moderate and high inflation regimes.

Democracy and Income Distribution in Sub-Saharan Africa

Isaac O. Mensah
,
Bank of Ghana
Richard A. Twumasi
,
University of Kansas

Abstract

The study sought to evaluate how democracy impacts on income distribution in sub-Saharan Africa. Using panel data regressions spanning 1960-2011, the study found out that the impact of democracy on equal distribution of income in sub-Saharan Africa is positive. However, it did not show significant direct impact on income distribution as expected. The study found no evidence to support the presence of an inverted U-shaped effect of democracy on income distribution in the region, but the trend in the results suggests that democracy has indirect effects on income distribution. The impact of democracy on income distribution in sub-Saharan Africa was found to be significantly dependent on how stable a country’s democracy is, and was also found to be marginally dependent on economic development. A good combination of democracy and political stability is crucial to the reduction of income inequality in sub-Saharan Africa.

Social Capital and Adoption of Sustainable Management Practices of Non Timber Forest Product in Cameroon

Sophie Michelle Eke Balla
,
University of Yaounde 2

Abstract

The renewable resource character of non-timber forest products (NTFPs) is an opportunity to it sustainability, this study analyzed the role of social capital in the adoption of sustainable management practices of NTFPs by households in the community forest (CF) Morikouali-ye. The analysis shows that 67% of households surveyed perceive the level of degradation of NTFPs in their CF as time passes and are close to 74% for adoption of sustainable management practices of NTFPs that are domestication, sustainable management of the CF, the logging ban trees and uprooting plants, etc. 26% refused to adopt these practices estimate that, at 39% it is better to promote logging in the CF. The estimated probit model shows that social capital through trust, solidarity and social inclusion significantly influences the probability of households to adopt sustainable NTFP management practices. In addition, age, education level and income from the sale of NTFPs have a significant impact on the probability of a doption. The probability of adoption increases with the level of education and confidence among households. So should they be animated by a spirit of solidarity and trust and not let a game of competition for sustainable management of NTFPs in their CF.

Behavioral Determinants of Biofortied Food Acceptance: The Case of Orange-Fleshed Sweet Potato in Ghana

Chinonso Etumnu
,
University of San Francisco

Abstract

Biofortifed foods are being introduced in sub-Saharan Africa as an important strategy to help address micronutrient malnutrition. However, there has been little research on factors that could play decisive roles in their successful introduction. This paper investigates the determinants of consumer acceptance of biofortied orange-fleshed sweet potato (OFSP) using data from a choice experiment conducted in Ghana. I find that OFSP is preferred to traditional white-fleshed and yellow-fleshed sweet potatoes as indicated by consumers' marginal willingness to pay for the three varieties. I also find that respondents' socio-economic characteristics do not have a significant effect on consumer acceptance of OFSP. Conversely, providing consumers with information about the nutritional benefits of OFSP exert a substantial, positive and significant effect on their acceptance of the produce. Providing nutritional information thus appears to be more crucial in the successful introduction of OFSP and other biofortified foods.

Climate Change Effects on Cocoa Export: Case Study of Cote d’Ivoire

Salifou K. Coulibaly
,
Hunan University
Terence M. Metuge
,
Hunan University
Cao Erbao
,
Hunan University
Zhang Ya Bin
,
Hunan University

Abstract

This paper attempts at examining the long-run effect of climate change on export revenue of the cocoa industry of Cote d’Ivoire. We apply an Autoregressive Distributed Lag (ARDL) approach using time-series data for a period of 45 years from 1966-2011 to investigate this phenomenon. The results indicate that precipitation may affect cocoa export revenues in the Ivorian economy. This finding, in accordance with the Jones and Olken (2010) study, supports the notion of the adverse effects of precipitation on exports in least developing countries.

Start-Up Capital and Female Entrepreneurship in Africa: Evidence from Swaziland

Zuzana Brixiova
,
University of Cape Town
Theirry Kangoye
,
African Development Bank

Abstract

This paper examines gender differences in the amount and type of start-up capital and their links with entrepreneurial performance. It uses 2012 UN Swaziland Survey data of entrepreneurs to estimate a probit model with OLS and Quantile regression in a multivariate analysis. The empirical analysis from Swaziland shows that both women and men entrepreneurs with higher start-up capital and those who fund it from the formal financial sector post higher sales than those with smaller capital funded from other sources. Similarly to other African countries, women entrepreneurs in Swaziland have smaller start-up capital and are less likely to finance it from the formal sector than men. Further, women who receive family and professional support tend to start their firms more often with loans from formal sources than women without such support, pointing to a room for policy interventions.
Discussant(s)
Richard A. Twumasi
,
University of Kansas
Isaac O. Mensah
,
Bank of Ghana
Theirry Kangoye
,
African Development Bank
Salifou K. Coulibaly
,
Hunan University
Sophie Michelle Eke Balla
,
University of Yaounde 2
Edward E. Ghartey
,
University of the West Indies
JEL Classifications
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
  • O1 - Economic Development