Alexander Bilson Darku

The gravity model and the test for the regional integration effect:the case of Tanzania

This paper demonstrates that the appropriate econometric technique of testing for the effect of regional integration on bilateral trade is to augment the standard gravity model with country specific dummies instead of regional integration dummies. Using data on bilateral trade between Tanzania and her 23 trading partners over the period 1980–2004, the paper reports three important results. First, contrary to results from the traditional approach, estimates from the new econometric technique indicate that both the EU and the EAC have had moderate trade creation effects on Tanzania’s bilateral trade. Second, I find that Tanzania’s non-traditional trading partners such as Japan, India, Singapore, Hong Kong and the USA are relatively more opened to Tanzania’s exports. Third, the results also indicate that whereas it is difficult for Tanzania’s exports to penetrate foreign markets, foreign goods easily penetrate Tanzania’s market. The policy implication is that the government should continue with its efforts to strengthen the EAC, and to gain more exports market to the non-traditional trading partners, if the export growth development strategy is to become a reality in Tanzania.

The impact of trade liberalization and the fiscal equalization transfer policy on provincial income disparities in Canada: an application of GMM estimation

This article uses the Solow growth model and the panel data method to examine the effect of trade liberalization and the federal equalization transfers on income convergence among Canadian provinces between 1981 and 2006. Estimation problems of weak instruments and endogenous regressors are addressed by the use of a system Generalized Method of Moment (GMM) estimator. The results from the empirical analysis indicate that the current rate of convergence of Personal Income (PI) in Canada is 4.41% per year. This rate is considerably higher than the range of 1.80 and 2.41% per year that previous studies using least-square estimators have reported. The findings from the policy analysis show that the launching and expansion of the North America regional integration have de-accelerated the convergence speed for Canadian provinces by 3.99 and 3.15% per year, respectively. However, consistent with the results from previous studies, the fiscal transfers, which are part of the federal equalization programme, have accelerated the convergence speed for Canadian provinces.

Economic openness and income growth in developing countries: a regional comparative analysis

ABSTRACT This article examines and compares the openness–growth relationship between the high-performing Asian economies (HPAEs) and the rest of the developing world (Sub-Saharan Africa-SSA, South East Asia-SEA and Latin America and Caribbean-LAC). We applied the SYS-GMM estimator to a dynamic standard endogenous growth model which relates economic openness to real per capita income growth. A few key findings emerged from this study. First, economic openness led to increase in real per capita GDP growth in HPAEs and SSA, but not in LAC and SEA. Second, openness to trade accelerated income convergence among countries in SSA, SEA, and HPAEs, however, whereas foreign direct investment inflows accelerated income convergence only in SSA, it rather de-accelerated income convergence in HPAEs. Thirdly, the HPAEs recorded higher positive effect of openness on real per capita GDP growth than any of the other developing regions because they created sufficient stock of human capital that enhanced their absorptive capacity of imported advanced technology. They also created a more stable macroeconomic environment which consolidated the income growth gains from openness. The results of this study highlight the importance of the implementation of policies that are complementary to economic openness in promoting economic growth in the developing world.

Consumption smoothing, capital controls and the current account in Ghana

Much of the empirical evidence on developing economies indicates that the basic intertemporal model of the current account fails to predict the dynamics of the actual current account series. This article argues that the model can predict the dynamics of the current account series if it is appropriately adjusted to reflect the nature of capital mobility and exchange rate policies in these countries. Using data on Ghana that span across capital control and liberalized regimes this article reports three finding. First, consistent with the existing empirical evidence, the basic model fails to predict the dynamics of the actual current account. Second, extending the basic model to capture variations in interest rates and exchange rates better explains the path of the actual current account balances only during the liberalized regime. Third, tests of asymmetric access to the international financial market indicate that economic agents in Ghana could not use the international financial market to smooth their consumption during the capital control regime. However, the liberalization program that reduced constraints on capital flows has enabled economic agents to use the international capital market to smooth consumption.Much of the empirical evidence on developing economies indicates that the basic intertemporal model of the current account fails to predict the dynamics of the actual current account series. This article argues that the model can predict the dynamics of the current account series if it is appropriately adjusted to reflect the nature of capital mobility and exchange rate policies in these countries. Using data on Ghana that span across capital control and liberalized regimes this article reports three finding. First, consistent with the existing empirical evidence, the basic model fails to predict the dynamics of the actual current account. Second, extending the basic model to capture variations in interest rates and exchange rates better explains the path of the actual current account balances only during the liberalized regime. Third, tests of asymmetric access to the international financial market indicate that economic agents in Ghana could not use the international financial market to smooth their consumption during the capital control regime. However, the liberalization program that reduced constraints on capital flows has enabled economic agents to use the international capital market to smooth consumption.

Does corporate governance structures promote shareholders or stakeholders value maximization? Evidence from African banks

The purpose of this paper is to explore the relationship between corporate governance structures and stakeholder and shareholder value maximization perspectives in 267 African banks from 2006 to 2011.,The authors used the Prais–Winsten ordinary least squares and random effect regression models to explore this relationship to ensure consistency and efficiency in results. The data for this study were collected from Bankscope.,The results of this study show that corporate governance structures such as CEO duality, nonexecutive members and extreme large board size lead to a reduction in both shareholder and stakeholder value maximization. However, audit independence and board size also promote both shareholder and stakeholder value maximization. Although gender diversity promotes profit maximization, it was not significant in any of the models estimated. The results further suggest that the same corporate governance structures promote and detract shareholder and stakeholder value maximization in Africa although the effect of corporate governance structures was weightier on shareholder value maximization confirming the agency theory.,From these findings, bank management must pursue the institution of good corporate governance structures and avoid weak corporate governance structures to promote shareholder and stakeholder value maximization. Also equity holders may have to pay particular attention to corporate governance structures because they benefit the most from the institution of good corporate governance structures.,This study explores and compares how corporate governance structures promote shareholder and stakeholder value maximization separately in African banks. To the best of the authors’ knowledge, this is the first of such studies.