MONEY,OUTPUT AND INFLATION IN AFRICAN ECONOMIES1

This paper examines the long‐run money‐inflation relation for 36 African countries using cross‐section and panel data analysis. The focus is on the recent claim by De Grauwe and Polan that the common finding in multi‐country studies of a strong positive link typically reflects the presence of high‐inflation countries in the sample and on Nelson's criticisms of the data and methodology employed in that study. Adjusting the De Grauwe and Polan methodology to take account of many of Nelson's criticisms, I confirm a weak long‐run relation between money growth and inflation for countries when money growth and inflation are below 10%, but a strong relation when money growth and inflation move much above that number. This result is not dependent on the inclusion of high inflation countries in the cross‐section and panel data samples.     

GOVERNANCE INSTITUTIONS AND PRIVATE INVESTMENT: AN APPLICATION TO THE MIDDLE EAST AND NORTH AFRICA

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing published reports, we categorize what types of governance institutions are more detrimental to entrepreneurial investments. We then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. Our empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of “administrative quality” in the form of control of corruption, bureaucratic quality, investment‐friendly profile of administration, law and order, as well as for “political stability.” Evidence in favor of “public accountability” is also found. Our estimations also stress that structural reforms like financial development, trade openness, and human development affect private‐investment decisions directly, and/or through their positive effect on governance.     

THE PROPERTIES OF CYCLES IN SOUTH AFRICAN FINANCIAL VARIABLES AND THEIR RELATION TO THE BUSINESS CYCLE

The paper describes cyclicality in a range of local and international financial variables and their relation to cyclical behaviour in the South African real economy. Cycles are derived using a dating algorithm similar to that used to determine business cycle turning points and falls within the Burns‐Mitchell tradition of business cycle analysis. Co‐movement between phases in financial variables and similar phases in the business cycle are described using the concordance statistic, instead of the correlation statistic (which requires stationarity). This is a preliminary step in identifying financial variables that can act as leading indicators of economic activity.     

HURDLE MODELS OF ALCOHOL AND TOBACCO EXPENDITURE IN SOUTH AFRICAN HOUSEHOLDS1

Estimates of participation or expenditure elasticities depend upon the assumptions made regarding the observation of zero expenditure at the household level. This research examines two single‐hurdle models across two commodities for which nearly two‐thirds of the observations are zero. The research shows that one hurdle model consistently outperforms the other, and does so for intuitively appealing reasons.     

THE LEGACY AND CHALLENGE OF FISCAL POLICY IN SUB‐SAHARAN AFRICA1

This paper traces salient aspects of the evolution of fiscal policy in sub‐Saharan Africa since 1960 and highlights the need for further reforms to consolidate the gains of the recent past. The fiscal position of the sub‐Saharan African region as a whole has improved markedly during the past ten years, but most countries still face formidable fiscal challenges. To consolidate the progress made during the past decade and to tackle the remaining problems, sub‐Saharan African policymakers should remain firmly committed to sound fiscal policies.     

DETERMINANTS OF SECTORAL COMPOSITION IN A SMALL OPEN ECONOMY: THEORETICAL AND QUANTITATIVE INVESTIGATIONS OF THE PHILIPPINES

The Philippine economy since the 1980s has undergone shifts of production, employment, and consumption in the direction of the greater share of nontradable sectors, despite relatively stagnant economic growth. This paper examines sources of the sectoral shifts theoretically and quantitatively based on a dynamic model of a small open economy. The theoretical analysis identifies possible factors affecting the evolution of the sectoral composition: changes in sectoral total factor productivity (TFP), the tariff rate, and the terms of trade. Then, the relative importance of these factors is examined quantitatively by conducting simulations of the model calibrated to the Philippine economy.     

EDUCATIONAL ATTAINMENT DIFFERENCES BETWEEN POPULATION GROUPS IN SOUTH AFRICA AND THE TIMING AND NUMBER OF BIRTHS

From 1981 to 2005, the total fertility rate in South Africa has been reduced from an estimated level of 4.6 to 2.8 children per woman. The relative differences in the total fertility rate between population groups, however, remain large. Our empirical analysis of the determinants of the timing of births shows that better‐educated women schedule birth later and have fewer children. The differences in education between population groups account for a substantive part (up to 40%) of the differences in completed fertility between the population groups. Our findings suggest that educational reforms aimed at equal access to education, which benefit African women most, may not only improve the quality of life of women but also, through their impact on fertility behaviour, yield long‐run benefits, as they will have fewer children and more resources to invest in the next generation.     

SOURCES OF ECONOMIC GROWTH AND TECHNOLOGY TRANSFER IN SUB‐SAHARAN AFRICA1

This paper provides some empirical evidence on the sources of growth in sub‐Saharan Africa (SSA). Within the classical convergence framework, several macroeconomic, socio and political factors are identified as affecting the steady state growth paths of the SSA countries. The rejection of the constant technology growth rate assumption implied by the linearised Solow‐Swan growth specification suggests differences in the economies' technology growth rates. An endogenous technology growth model is estimated to measure contributions of diminishing returns and technology transfer to the rate of conditional convergence in the region. The results carry important policy implications for improving the standard of living and economic growth rate of African countries.     

PRICE ELASTICITIES AND PRICING POWER IN EMERGING MARKETS: THE CASE OF PETROCHEMICAL‐DERIVED PLASTICS IN SOUTH AFRICA1

This paper examines whether there necessarily exists a conflict between allocative and productive efficiency in small open economy markets. That productive efficiency favours market concentration is not in dispute, and the sole question we face is whether allocative efficiency suffers under high market concentration. We proceed theoretically and econometrically. We find that the conflict between productive and allocative efficiency is not necessarily as stringent as the international competition policy literature suggests should be the case. In particular, we note that the strategic interaction between the large domestic producer and its competitors makes feasible a range of alternative price elasticities of demand, and empirically that all price elasticities of demand are less than or equal to unity. Nevertheless, the impact of market structure is such as to render feasible a wide range of possible levels of pricing power.