1,720,996 research outputs found
Africa and Arab Gulf states : divergent development paths and prospects for convergence
Get PDFIn spite of the similarities between Sub-Saharan Africa and the Arab Gulf region (Gulf Cooperation Council states), development policies implemented in these two regions of the world have produced markedly different and even divergent outcomes. While Gulf Cooperation Council states have drawn on hydrocarbon revenues to dramatically transform their economic landscape, Sub-Saharan African countries have exhibited abysmal economic and social outcomes. The remarkable increase in personal income and large current account surpluses in Arab Gulf states is in sharp contrast with widespread poverty and recurrent balance of payments crises in Sub-Saharan Africa. This paper reviews the possible causes of these divergent development paths and discusses the prospects for economic convergence in the new globalization landscape of growing trade ties between the two regions. In particular, it shows that development models underpinned by institutional continuity and intergenerational accountability could enhance long-run growth in Sub-Saharan Africa and income convergence between the two regions.Economic Theory&Research,Emerging Markets,Currencies and Exchange Rates,Debt Markets,
Conflicts and returns to stability in developing countries : a comparative analysis
Get PDFSub-Saharan Africa's dismal development outcomes -- growth collapse and declining real income -- are often used to highlight its sharp development contrast with other regions of the developing world. Drawing on a large cross-section analysis, this paper shows that Africa's underlying dismal records can also be largely accounted for by the skewed distribution of growth in the post-independence era. In particular, structurally low investment rates in a context of high political risk and uncertainty undermined growth prospects in the region. However, counterfactual simulations based on a variation of neoclassical growth models and under the hypothetical equalization of political risk profile alternative result in large economic returns, reflected in the significantly higher level of aggregate output and income in the subset of conflict-affected countries. Income gets even higher when the hypothetical reduction of political risks alternative is accompanied by sustained increases in capital accumulation.Economic Theory&Research,Post Conflict Reconstruction,Achieving Shared Growth,Emerging Markets,Debt Markets
Determinants of globalization and growth prospects for Sub-Saharan African countries
Get PDFOver the decades leading to the global financial crisis, the world witnessed a deepening integration of world economies, irrespective of a country’s geographical location on the spherical space. This process of increasing interdependence of world economies, most notably illustrated by the scale of financial flows and movements of goods and services now termed globalization, has been facilitated by research and development and advances in technology, especially in the area of information and communication technology. In spite of its global nature, its expected benefits have not been uniformly distributed, however. This paper shows that the countries and regions that are driving the process of knowledge creation and production of high-tech and manufactured goods, building on frontier technology, are benefiting the most from globalization, increasingly acting as drivers and relegating Sub-Saharan Africa to the end-user status. In this process, the income gap between Sub-Saharan Africa and the globalizers has increased even more. However, the paper also shows that raising the level of technological endowment in Sub-Saharan Africa to that of developed countries could go a long way to bridge Africa's output gaps and improve its export performance in the new globalization landscape of the post-financial crisis era.Debt Markets,Emerging Markets,Economic Theory&Research,Currencies and Exchange Rates,
Causality between external debt and capital flight in Sub-Saharan Africa
Get PDFOver the past few decades, the foreign liabilities of the majority of countries in Sub-Saharan Africa have grown dramatically, propelling most nations into the status of Highly Indebted Poor Countries, when these liabilities reached unsustainable levels in the 1990s. At the same time, increases in capital flight from the region followed a parallel trend, leading scholars to draw on"revolving door"models to explain the apparent positive covariation of external debt and capital flight in the region. This paper investigates the causality between external debt and capital flight in a cross-section of Sub-Saharan African countries using co-integration and error-correction models. Although dual causality, which is consistent with the revolving door hypothesis, cannot be rejected for the majority of countries, empirical evidence highlights the lead of external debt over capital flight. The significance of error-correction terms points to a long-run co-integrating relationship between external debt and capital flight in a large number of countries.Economic Theory&Research,External Debt,Debt Markets,Deposit Insurance,Currencies and Exchange Rates
Potential gains from capital flight repatriation for Sub-Saharan African countries
Get PDFDespite the recent increase in capital flows to Sub-Saharan Africa, the region remains largely marginalized in financial globalization and chronically dependent on official development aid. And with the potential decline in the level of official development assistance in a context of global financial crisis, the need to increase domestic resources mobilization as well as non-debt generating external resources is critical now more than ever before. However, the debate on resource mobilization has overlooked an important untapped source of funds consisting of the massive stocks of private wealth stashed in Western financial centers, a substantial part of which left the region in the form of capital flight. This paper argues that the repatriation of flight capital should take a more prominent place in this debate from a moral standpoint and for clear economic reasons. On the moral side, the argument is that a large proportion of the capital flight legitimately belongs to the Africans and therefore must be restituted to the legitimate claimants. The economic argument is that repatriation of flight capital will propel the sub-continent on a higher sustainable growth path while preserving its financial stability and without mortgaging the welfare of its future generations through external borrowing. The analysis in the paper demonstrates quantitatively that the gains from repatriation are large and dominate the expected benefits from other sources such as debt relief. It is estimated that if only a quarter of the stock of capital flight was repatriated to Sub-Saharan Africa, the region would go from trailing to leading other developing regions in terms of domestic investment, thus initiating a ‘big-push’-led sustainable long-term economic growth. The paper proposes some strategies for inducing capital flight repatriation, but cautions that the success of this program is contingent on strong political will on the part of African and Western governments and effective coordination and cooperation at the global level.Access to Finance,Economic Theory&Research,Investment and Investment Climate,Debt Markets,Emerging Markets
Specification of investment functions in Sub-Saharan Africa
Get PDFIt is a well-known fact that one of the most important determinants of growth is private investment. But in the developing country context of widespread poverty, the effects of initial conditions on the process of capital accumulation have seldom been investigated. This paper highlights heterogeneity in the process of capital accumulation across different countries in Sub-Saharan Africa, and derives a formal specification of investment functions in the primary, industry, and service sectors in the region using a variation of the combined Tobin's Q Theory and the neoclassical models of investment. The results highlight a more rapid accumulation of capital in the relatively high income subpanel and a widening public-private capital accumulation gap. A functional specification points to the significance of aggregate profitability shocks, the financing cost of investment, and public capital stock in estimating the growth rate of private capital accumulation. These results are supported empirically, as highlighted by the relatively small absolute deviation between actual and predicted value distributions.Investment and Investment Climate,Economic Theory&Research,Trade and Regional Integration,Non Bank Financial Institutions,Economic Growth
Fiscal adjustment and growth in Sub-Saharan Africa : overview and lessons from the current downturn
Get PDFIn light of the proliferation of exceptionally large fiscal stimuli to ward off the recession triggered by the 2008 global economic and financial crisis in most advanced economies, this paper revisits the fiscal adjustment and growth nexus in Sub-Saharan Africa. Using transfer functions, it quantifies expected losses in terms of aggregate output largely attributed to a systematic implementation of pro-cyclical expenditure switching and reducing policies to achieve low deficit targets throughout the decades ofadjustments. The results consistently highlight a much higher predicted aggregate output under the hypothesized counter-cyclical fiscal expansion option. This consistent outcome suggests that the output gap would have been significantly smaller in the region if countries had drawn on stop-and-go policies of fiscal expansion to sustainably raise the stock of capital investments.Debt Markets,Public Sector Expenditure Policy,Fiscal Adjustment,Economic Stabilization,Economic Theory&Research
Dynamics of income inequality and welfare in Latvia in the late 1990s
Get PDFThis paper analyzes the dynamics of poverty and income inequality during the recovery phase of the transition that characterized the Republic of Latvia in the late 1990s. Despite a continued rise in income inequality, empirical evidence suggests an improvement in living standards, owing largely to a significant surge in per capita income growth, particularly in urban areas. In a context of rising income inequality and widening urban-rural income and poverty gaps, the benefits of growth were not equally distributed, and poverty persisted in a number of regions (particularly the regions of Latgale and Vitzeme) and among some socioeconomic groups (particularly households deriving their main income from social benefits). In addition to income inequality and asset endowments, poverty appears to be highly correlated with a number of labor market-related variables, particularly unemployment, suggesting that the labor market could be an important transmission channel from growth to poverty. However, though positive, the association between poverty and unemployment is non linear, especially in urban areas, where the labor market and demand are the most important channels of transmission through which growth and macroeconomic development affect household income and living standards.Services&Transfers to Poor,Poverty Impact Evaluation,Health Economics&Finance,Environmental Economics&Policies,Poverty Monitoring&Analysis,Inequality,Environmental Economics&Policies,Safety Nets and Transfers,Rural Poverty Reduction,Services&Transfers to Poor
The nature and dynamics of poverty determinants in Burkina Faso in the 1990s
Get PDFThe author investigates the determinants and dynamics of poverty during the five-year growth period that followed the 1994 CFA franc devaluation in Burkina Faso. Results show that the nature and dynamics of poverty determinants are influenced by the spatial location of households and that the post-devaluation growth period did not significantly alter the pattern of poverty determinants. The most significant determinants of poverty over the growth period include the burden of age dependency, human and physical assets, household amenities, and spatial location. Though consistently significant at the national level, the direction of association between these determinants and welfare depends on their nature. While the burden of age dependency is consistently negatively associated with welfare, asset ownership is positively associated. The probability of being poor declines with increasing share of household assets and increases with the burden of age dependency. There are some variations at the regional level, however, shown by the difference in the scope of significance of these determinants. While the ratio of age dependency remains the most significant determinant of rural poverty, its explanatory power decreases considerably inurban areas where its marginal effect on the probability of being poor is relatively low over the two reference periods, despite the significance of the probit coefficient and the relatively low asymptotic standard error.Health Economics&Finance,Environmental Economics&Policies,Services&Transfers to Poor,Public Health Promotion,Health Systems Development&Reform,Poverty Assessment,Achieving Shared Growth,Environmental Economics&Policies,Health Economics&Finance,Poverty Reduction Strategies
The Nature and Dynamics of Poverty
No full textThe author investigates the determinants
and dynamics of poverty during the five-year growth period
that followed the 1994 CFA franc devaluation in Burkina
Faso. Results show that the nature and dynamics of poverty
determinants are influenced by the spatial location of
households and that the post-devaluation growth period did
not significantly alter the pattern of poverty determinants.
The most significant determinants of poverty over the growth
period include the burden of age dependency, human and
physical assets, household amenities, and spatial location.
Though consistently significant at the national level, the
direction of association between these determinants and
welfare depends on their nature. While the burden of age
dependency is consistently negatively associated with
welfare, asset ownership is positively associated. The
probability of being poor declines with increasing share of
household assets and increases with the burden of age
dependency. There are some variations at the regional level,
however, shown by the difference in the scope of
significance of these determinants. While the ratio of age
dependency remains the most significant determinant of rural
poverty, its explanatory power decreases considerably in
urban areas where its marginal effect on the probability of
being poor is relatively low over the two reference periods,
despite the significance of the probit coefficient and the
relatively low asymptotic standard error
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