Jonathan Munemo

Foreign Aid and Export Performance: A Panel Data Analysis of Developing Countries

The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.

Foreign aid and export diversification in developing countries

This paper analyzes the effect of foreign aid on export diversification for a sample of developing countries while controlling for the effects of other factors that determine export diversification. We find that foreign aid not exceeding 20% of a countrys GDP significantly promotes export diversification, while foreign aid in excess of 20% of GDP significantly impedes export diversification. The latter result corroborates evidence from related literature, which has shown that foreign aid can have an anti-export bias due to a Dutch disease effect. However, our results show that aid as a percent of GDP is below 20% in most low-income countries. This implies that in many low-income countries, varying amounts of additional aid can be used to enhance export diversification without causing a Dutch disease effect. As in the previous literature, we find that the level of development, infrastructure, transactions costs, and natural resources significantly affect export diversification. Our results are robust to the use of two different export diversification measures and different sub-samples.

Examining Imports of Capital Goods From China as a Channel for Technology Transfer and Growth in Sub-Saharan Africa

The author contributes to related literature by analyzing how economic growth in Sub-Saharan Africa is affected by the growing dependency on capital goods from China. The author finds robust evidence in support of the hypothesis that capital goods from China are an important technology transfer channel that enhances economic growth in Africa. Therefore, trade liberalization policies aimed at attracting Chinese capital on a non-preferential basis are important. In addition, the results also suggest that growth strategies based on greater physical and human capital accumulation, increased trade openness, political stability, and less government consumption expenditure are important.

ENTREPRENEURSHIP IN DEVELOPING COUNTRIES: IS AFRICA DIFFERENT?

This paper uses data on new firm registrations to examine entrepreneurship in Africa relative to other developing countries. The results show that new firm creation is more pronounced in other developing regions than in Africa. In addition, the results also show that entry deregulation and political stability are relatively more important for the creation of new businesses in Africa. These results imply that Africa is different; therefore, it is important to implement reforms to create a business environment conducive for new firm creation in Africa. Reforms in governance are also required to address problems related to political stability to increase entrepreneurial activity in Africa.

Foreign Aid, Illegal Immigration, and Host Country Welfare

This paper analyzes the effect of foreign aid on illegal immigration and host country welfare using a general equilibrium model. It shows that foreign aid may worsen the recipient nations terms of trade. Furthermore, it may also raise illegal immigration, if the terms of trade effect on immigration flows dominates the other effects identified in our analysis. Empirical analysis of the effect of foreign aid on illegal immigration to the USA broadly supports the predictions of our theoretical model. Foreign aid worsens the recipients terms of trade. While the terms of trade effect tends to reduce illegal immigration, countervailing effects are found to dominate. The paper contributes to the related literature by establishing that there are unintended consequences of foreign aid and, while some of them are reminiscent of the classical transfer problem, others are new and arise as a result of endogenous illegal immigration flows.

Business Regulations and Private Domestic Investment in Africa

In this article, the author seeks to complement the perception-based studies by utilizing the objective measures from the Doing Business project to analyze the relationship between business regulations and private domestic investment in Africa. He reports evidence that reforms in business regulations affecting contract enforcement, tax administration, firm entry, labor markets, and the private sector as a whole positively affect private domestic investment in Africa. These findings are important for assisting policy makers in creating a business regulatory environment that promotes domestic private investment and thereby encourages economic growth in Africa.

Chapter 21 Foreign Aid and Export Performance: A Panel Data Analysis of Developing Countries

The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.

The Impact of Regulations and Institutional Quality on Entrepreneurship

This paper examines the impact of start-up regulations and institutional quality on the level of new business activity in a panel of 119 countries between 2001 and 2012. We find robust evidence that new business creation is significantly lower in countries with excessive barriers to entry, a lack of high-quality governmental institutions, or both. Specifically, increasing the number of steps required to start a new business by one step reduces entrepreneurial activity by approximately 9.7 percent. Furthermore, three measures of institutional quality (i.e., political stability, regulatory quality, and voice and accountability) are shown to promote entrepreneurship, whereby an increase of one standard deviation in these measures increases new business activity by 30 percent to 52 percent.

Regulation of Entry and the Variety of Manufactured Exports from Developing Countries

This paper analyzes the effect of regulation of firm entry on the variety of manufactured goods exported by developing countries. Using panel regressions, I find robust evidence that an increase in entry regulation significantly reduces the variety of manufactured goods that developing countries export. Given the evidence which clearly shows that export variety of manufactured goods positively affects productivity, the results imply that reducing regulatory barriers to entry can raise productivity, and this is especially important in low income countries where exports are heavily concentrated in primary products and the cost of entry regulation is quite high.

Domestic Credit and Diversification of Manufactured Exports from Developing Countries

This article uses panel data to analyse the effect of domestic credit on the diversification of manufactured exports from developing countries. Given the evidence that export variety of manufactured goods affects productivity positively, the results imply that policy reforms that improve access to domestic credit for firms can raise productivity and hence economic growth in many poor countries. In addition, the results also show that building infrastructure and implementing reforms in governance that improve the quality of government regulations are important for encouraging diversification of manufactured export products in developing countries.