Abera Gelan

How stable is the demand for money in African countries

Purpose - Studies that have addressed the stability of the demand for money in African countries are rare. A few papers have addressed the issue in a small number of individual countries. For cross-country comparison, this paper aims to investigate the stability of the M2 demand for money in 21 African countries using quarterly data over the period 1971Q1-2004Q3. Design/methodology/approach - A standard money demand function is designed. It is estimated using a bounds testing approach to co-integration and error-correction modeling. Findings - Application of the CUSUM and CUSUMSQ tests to the residuals of error-correction models reveals that in almost all 21 countries, M2 demand for money is stable. This could be due to incorporating the short-run adjustment process in testing for the stability of the long-run elasticity estimates. Research limitations/implications - Due to data limitations, the study could not be extended to all countries in Africa. Originality/value - This is the most comprehensive study in the literature for Africa.

Real and nominal effective exchange rates for African countries

The real effective exchange rate is an index that is used to measure international competitiveness of a country. While the International Monetary Fund constructs and publishes the index for all industrial and some newly industrialized countries, the African nations receive no such attention. In this article we construct quarterly indexes of real and nominal effective exchange rates over the 1971I–2004III period for 21 African countries. We hope by publishing this data set, more research attention will be given to these countries. As an application, we test for the stationarity of the real effective rates to show that the Purchasing Power Parity theory holds only in four of our 21 cases.

Are Devaluations Contractionary in Africa

Abstract As far as the impact of devaluation on domestic production is concerned, African countries have not received much attention in the literature. One study that used panel data arrived at a general conclusion that devaluations are contractionary in Africa. In this paper, we consider the experience of 22 African countries with devaluation and use time series data to show that devaluations are indeed expansionary in eight countries and contractionary in five countries. In the remaining countries, they have no effect.

Is there J-Curve effect in Africa?

The J-Curve is a term used to describe the post-devaluation behavior of the trade balance, i.e., initial deterioration followed by an improvement. Previous research has tested the phenomenon for many developed and developing countries. However, African nations have not received any attention on this regard. In this paper, we test the hypothesis for nine African countries of Burundi, Egypt, Kenya, Mauritius, Morocco, Nigeria, Sierra Leone, South Africa, and Tanzania for which quarterly trade data were available. After using the bounds testing approach to cointegration and error-correction modeling, we were unable to find any support for the J-Curve.

African economies and the Kuznets curve: an exploratory investigation

This article examines the relationship between income inequality and economic development in a cross-section of countries. It estimates, on a small exploratory sample, an explicit Kuznets-type inequality relationship where inequality between skilled and unskilled labour is a function of the determinants of growth implied by a standard neoclassical growth model. Parameter estimates suggest that sub-Saharan African Economies are dualistic and are situated on the segment of the Kuznets’ curve where inequality increases with respect to development.

On the relation between income distribution and economic growth

Most of the research on the relation between economic growth and income distribution has concentrated on the well-known Kuznets inverted-U hypothesis which claims that economic growth initially worsens income inequality and then it improves it. A few studies have argued that income inequality could also affect economic growth through its impact on saving and investment. In this paper, we use time-series data from 18 developing countries along with the bounds testing approach and investigate bi-directional causality between economic growth and a measure of income inequality. We find that while there is short-run bi-directional causality in most countries, the long-run causality is limited to less than half of the countries in the sample.

Non-linear quantile unit root test and PPP: more evidence from Africa

ABSTRACT It is now a common practice to establish stationarity of the real exchange rate as a sign of purchasing power parity (PPP) hypothesis. In this article, we consider the real effective exchange rates of 29 African countries. When we apply conventional linear unit root tests, we find support for the PPP in eight countries. However, when we shift to the newly introduced non-linear quantile unit root test, support for the PPP increases to 15 countries.