Trade, Artificial Intelligence, Green Growth, and Sustainability Frontiers
Saturday, Jan. 6, 2024 10:15 AM - 12:15 PM (CST)
Christian Nsiah, Baldwin Wallace University
- Eman Moustafa, Afreximbank
Firms’ Access to Finance, Export Trade Channels, and Exports in Africa
AbstractThe paper examines the effects of export trade channels and access to finance on exports in Africa. We employ mixed effect regression and the dynamic system Generalized Method of Moments (GMM) for a panel dataset of 46 African economies over the period, 2006 - 2020. First, it contributes to the literature by employing subjective measures of export channels and show how different measures of access to finance affect them. Second, it examines the direct and independent effect of access to finance and export channels on exports (export intensity and export status). Finally, the study interacts export channels with access to finance to examine their impacts on exports (export intensity and export status). We find that access to finance is more effective in promoting direct export trade channels and hybrid export trade channels compared to indirect export trade channels. We show that small and medium enterprise’s (SMEs’) access to bank finance leads to an increase in the level of exports. We also find that direct and hybrid export channels increase the level of exports, while indirect export channels result in a decline in the level of exports. We provide evidence to support that access to finance complements the overall effect of export trade channels on the level of exports, hence, an increase in the use of specific export trade channels increases the level of exports when SMEs have access to bank finance.
Dances with Wolves: Weather and Health Disasters and Fiscal Sustainability in Africa
AbstractFiscal sustainability is a major source of concern in light of the successive weather and health disasters. We estimate the contemporaneous and long-run effects of weather vis-à-vis health disasters on the fiscal sustainability of North African economies during 1990-2022 using two-way fixed-effects and two-step system general method of moments strategies. We also examine if domestic resource mobilization and external financing act as fiscal stabilizers that mitigate disaster effects. We find that weather disasters reduce the budget and overall fiscal balances by 2.1% and 2.2% instantaneously and by 5.4% and 6.2% after one year, respectively. Health disasters reduce the budget and overall fiscal balances by, respectively, 0.4% and 0.3% instantaneously, with no long-run effects observed. Our estimates indicate that government debt can help mitigate all types of disasters. Domestic resources from sovereign wealth funds and business taxation are more effective in mitigating weather disasters' effects than external sources of finance. Countries with higher foreign reserves and net savings are better able to fiscally endure health disasters. This study emphasizes the significance of domestic resource mobilization vis-à-vis external sources of finance in times of disasters.
Being Green and Prudent? Economic Implications of Production Subsidy for Renewable Energy in Nigeria
AbstractEnergy poverty is a major challenge in Nigeria despite the country being one of the largest producers of primary energy resources in the world. The need to improve energy access and mitigate climate change via renewable energy led to the formulation of the National Renewable Energy and Energy Efficiency Policy (NREEEP) in 2015. The NREEEP aims to expand energy access while reducing energy-related CO2 emissions. The policy sets short, medium and long-term targets for renewable-energy sources. As part of the financial investment mechanism for achieving the renewable goals, the NREEEP emphasises investment in the energy transition through production subsidy and tax credit. Emodi and Ebele (2016) also note that production-tax credits and structural tax policy are more practicable and administratively feasible for achieving the renewable goals in the Nigerian context.
However, considering Nigeria’s limited fiscal space and the issues surrounding the economic implications of the green transition in general (IRENA, 2016; Jenniches, 2018), it is pertinent to assess the economic and environmental implications of investing in the green transition via public finance. This is the focus of this study. Thus, this paper examine the economic and environmental effects of production subsidy for renewable energy in Nigeria. The study further analyses the implications of reducing investment in other sectors to finance the green transition.
This study uses a CGE model to simulate the economic and environmental effects of a 20% production subsidy for green transition in Nigeria. CGE models have been widely used to analyse the economy-wide impacts of renewable energy policy (Kretschmer & Peterson, 2010), including in Nigeria (Iwayemi & Adenikinju, 2001; Adenikinju et al., 2009). The reference CGE model adopted is the PEP 1-1 model developed by Decaluwé et al. (2013). The model is a single-country static model. The production factors in the model are labour and capital.
The Impact of Worker Remittances on Stability of the Franc CFA Regime
AbstractTo the extent that remittance inflows have important macroeconomic effects on recipient country’s equilibrium real exchange rate; and to the extent that remittances to CFA countries continue to grow; the question as to the impact of remittance inflows on the stability of the CFA Franc regime remains an urgent empirical issue. This paper employs recent data for 11 CFA Zone countries during 2000-2022 using GMM technique with instrumental variables to investigate this issue.
Our findings suggest evidence of remittances causing the Dutch Disease problem in CFA Franc Zone countries but the resulting misalignments of the equilibrium real exchange rate found are marginal. We also find that aid does not have Dutch Disease effects in CFA Franc economies, consistent with numerous prior studies but we found that policies implemented following covid-19 contributed significantly to the misalignment of the real exchange rate. Finally, our findings also reveal strong persistent effects of misalignments in CFA Franc Zone economies, which could be partly attributed to the notably slow speed of adjustment of the equilibrium real exchange rate to its long-run equilibrium in these economies, especially following shocks like the 2008-2009 financial crisis and the recent covid-19 pandemic. The implications of these findings are firstly that, as far as the goal of achieving sustainable external trade balance and maintaining a stable fixed exchange regime are concerned, policy-makers in CFA Franc Zone economies need not worry about growing remittance inflows. Secondly, further research needs to try to uncover the mechanics driving the persistent effects of misalignments of the equilibrium real exchange rate in CFA Franc economies, as an understanding of those drivers could contribute to stability of the fixed regime, in a world of increasing domestic and external shocks.
Do the JSE Firms Manage Earnings Differently During High- and Low-Sentiment States?
AbstractAccounting choices involve decisions that are subject to the influence of prevailing sentiment in the capital market. This paper offers evidence on how market sentiment in optimistic (high) and pessimistic (low) states influences earnings management behaviour in South Africa. Based on the selected sample on the McGregor BFA database (2010–2019), the sentiment index was computed using the difference in price-earnings ratio (DIFFPE) according to Conrad, Cornell and Landsman (2002), and the earnings management metric was computed using the discretionary accruals of the standard and modified Jones according to Jones (1991) and Dechow, Sloan and Sweeney (1995), respectively. The results, based on the panel corrected standard error (PCSE), suggest that sentiment reflects a negative (positive) impact on earnings management in the pessimistic (optimistic) market state. Moreover, the evidence replicates stronger sentiment impacts during high- relative to low-sentiment states. In line with predictions, high sentiment causes greater earnings distortions and therefore increases earnings management, making JSE managers report less value-relevant earnings. The result is sensitive to time-varying correlated controls and alternative measures of earnings management. Given a higher explanatory power, models with high-sentiment states outperform their counterparts with low-sentiment states for the alternative defined models. The finding reinforces the need for investors and other participants in the South African capital market to be more thorough of earnings reported by the firms since managers, in response to prevailing sentiment, may manage earnings through accruals to inflate profits and manipulate investment and market decisions.
Keywords: Investor Sentiment, Earnings Management, High Sentiment, Low Sentiment, PCSE
Trade Openness, Telecommunication, Institution and Economic Growth Nexus: The Case of Landlocked African Countries
AbstractThis study attempts to analyse the effect of trade openness, telecommunication, and institutional structure on economic growth in some selected African landlocked countries. Both theoretical reviews of comparative cost advantage and the Solow-Swan growth model showed that landlocked countries should not be a hindrance to economic growth. Rather, economic growth should depend on opportunities open to each of the landlocked countries. To justify these theories, an attempt is made to econometrically evaluate the hypothesis of a positive relationship between trade openness, telecommunication, institution, and economic growth in landlocked African countries in the short run and long run, between 1980 and 2021. This broad objective would be achievable by employing the pooled mean group estimation technique, based on secondary data from 15 landlocked African countries. These data are obtainable from the World Bank’s World Development and Governance Indicators (WDI & WGI). The empirical findings suggest that each of trade openness, economic governance, and telecommunication exerts a significant and positive relationship with economic growth; each of institutional governance and political governance is, however, found to have a negative relation with economic growth. Importantly, the findings of the study will help the landlocked developing countries to enhance their exportation and encourage the skill that will bring advanced technology to their countries. Overall, the findings from this study should serve as recommendations for policymakers to improve macroeconomic policies, telecommunication infrastructure and strengthen the institutional structure that will enhance the sustainability of economic growth in African landlocked countries.
- F5 - International Relations, National Security, and International Political Economy
- E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook