Hippolyte Fofack

Nonperforming Loans in Sub-Saharan Africa: Causal Analysis and Macroeconomic Implications

This paper investigates the leading causes of nonperforming loans during the economic and banking crises that affected a large number of countries in Sub-Saharan Africa in the 1990s. Empirical analysis shows a dramatic increase in these loans and extremely high credit risk, with significant differences between the CFA and non-CFA countries, and substantially higher financial costs for the latter sub-panel of countries. The results also highlight a strong causality between these loans and economic growth, real exchange rate appreciation, the real interest rate, net interest margins, and interbank loans consistent with the causality and econometric analysis, which reveal the significance of macroeconomic and microeconomic factors. The dramatic increase in these loans is largely driven by macroeconomic volatility and reflects the vulnerability of undiversified African economies, which remain heavily exposed to external shocks. Simulated results show that macroeconomic stability and economic growth are associated with a declining level of nonperforming loans; whereas adverse macroeconomic shocks coupled with higher cost of capital and lower interest margins are associated with a rising scope of nonperforming loans. These results are supported by long-term estimates of nonperforming loans derived from pseudo panel-based prediction models.

Household welfare and poverty dynamics in Burkina Faso : empirical evidence from household surveys

The authors investigate the dynamics of poverty and income inequality in a cross-section of socio-economic groups and geographical regions over the five-year growth period following the 1994 devaluation of the CFA franc in Burkina Faso. Results show rapidly increasing urban poverty accompanied by rising income inequality, declining poverty -growth elasticities, and significant changes in the poverty map. In rural areas, the incidence of poverty remained the same and income inequality did not increase. In contrast, the distribution of welfare across socio-economic groups was more stable. The rank ordering of socioeconomic groups on the welfare scale did not change during the post-devaluation growth period. Poverty remains largely a rural phenomenon, whose inelastic nature may justify a shift toward growth-oriented policies that at least maintain the rural poors share of income to reduce poverty in the medium term. Among factors that feed into income inequality: disparities in wages and in educational attainment and unequal access to productive assets (especially human capital).

The Integrated Macroeconomic Model for Poverty Analysis: A Quantitative Macroeconomic Framework for the Analysis of Poverty Reduction Strategies

The authors present a dynamic, quantitative macroeconomic framework designed for analyzing the impact of adjustment policies and exogenous shocks on poverty and income distribution. They emphasize the role of labor market segmentation, urban informal activities, the impact of the composition of public expenditure on supply and demand, and credit market imperfections. Numerical simulations for a prototype low-income country highlight the importance of accounting for the various channels through which poverty alleviation programs and debt relief may ultimately affect the poor.

The nature and dynamics of poverty determinants in Burkina Faso in the 1990s

The 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.

Distribution of parallel exchange rates in African countries

Abstract This paper investigates the distribution of parallel exchange rates in African countries using exploratory data analysis techniques and model fitting. Stable laws are fitted to empirical distributions using the maximum likelihood estimation method. Empirical evidence supports the stable hypothesis these distributions are positively skewed and have tails that are much heavier than Gaussian counterparts. The stable hypothesis is further supported by the “converging variance test,” which suggests that these distributions have infinite variance.

Technology Trap and Poverty Trap in Sub-Saharan Africa

Since the industrial revolution, advances in science and technology have continuously accounted for most of the growth and wealth accumulation in leading industrialized economies. In recent years, the contribution of technological progress to growth and welfare improvement has increased even further, especially with the globalization process which has been characterized by exponential growth in exports of manufactured goods. This paper establishes the existence of a technology trap in Sub-Saharan Africa. It shows that the widening income and welfare gap between Sub-Saharan Africa and the rest of world is largely accounted for by the technology trap responsible for the poverty trap. This result is supported by empirical evidence which suggests that if countries in Sub-Saharan Africa were using the same level of technology enjoyed by industrialized countries income levels in Sub-Saharan Africa would be significantly higher. The result is robust, even after controlling for institutional, macroeconomic instability and volatility factors. Consistent with standard one-sector neoclassical growth models, this suggests that uniform convergence to a worldwide technology frontier may lead to income convergence in the spherical space. Overcoming the technology trap in Sub-Saharan Africa may therefore be essential to achieving the Millennium Development Goals and evolving toward global convergence in the process of economic development.

The Contribution of African Women to Economic Growth and Development in the Pre-Colonial and Colonial Periods: Historical Perspectives and Policy Implications

ABSTRACT Bringing together history and economics, this paper presents a historical and processual understanding of womens economic marginalization in sub-Saharan Africa from the pre-colonial period to the end of colonial rule. It is not that women have not been economically active or productive; it is rather that they have often not been able to claim the proceeds of their labor or have it formally accounted for. The paper focuses on the pre-colonial and colonial periods and outlines three major arguments. First, it discusses the historical processes through which the labor of women was increasingly appropriated even in kinship structures in pre-colonial Africa, utilizing the concepts of “rights in persons” and “wealth in people”. Reviewing the processes of production and reproduction, it explains why most slaves in pre-colonial Africa were women and discusses how slavery and slave trade intensified the exploitation of women. Second, it analyzes how the cultivation of cash crops and European missionary constructions of the individual, marriage, and family from the early decades of the 19th century sequestered female labor and made it invisible in the realm of domestic production. Third, it discusses how colonial policies from the late 19th century reinforced the “capture” of female labor and the codification of patriarchy through the nature and operation of the colonial economy and the instrumentality of customary law.

Specification of Investment Functions in Sub-Saharan Africa

It 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 Tobins 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.

The Contribution of African Women to Economic Growth and Development in Post-Colonial Africa : Historical Perspectives and Policy Implications

This paper draws on history, anthropology, and economics to examine the dynamics and extent of womens contribution to growth and economic development in post-colonial Africa. The paper investigates the paradox of increased female enrollment in education and the persistence of gender discrimination in labor force participation; it also considers the overwhelming importance of the informal economy in female economic activity. The first axis the paper studies is whether reducing educational gender gaps enhances growth in per capita gross domestic product and reduces female fertility rates and infant mortality. The question is, why would some African countries resist this pattern? The second axis examines agriculture and home production. Womens economic activities in the informal economy largely represent the commercialization of domestic skills and dependence on social networks. The shunting of female production to the informal sector in the male-dominated colonial economy is easy to understand, but why has the informal economy persisted where female production is concerned well beyond the colonial period? The paper attempts to explain these trajectories by using country case studies on Senegal, Botswana, and Kenya. Although womens contribution to growth and economic development seems to be positive and significant in predominantly Christian and mineral-rich economies, it is more constrained in pronounced Muslim dominated countries and agrarian economies. At the same time, impressive uniform growth in informal sector production in recent years suggests that occupational job segregation and gender inequality remain strong across the region, despite the apparent loosening of traditional norms and cultural beliefs, most notably illustrated by the reduction in educational gender gaps and increased female labor force participation rates.

Africa and Arab Gulf States : Divergent Development Paths and Prospects for Convergence

In 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.