Working Paper Series



Working Paper 254 - Exchange Rate Policies and FDI Flow in WAMZ

Foreign Direct Investment (FDI) is a main source of much desired capital flow as it is capable of facilitating technological spillovers, job creation and improves managerial skills and productivity in recipient countries (Blomstrom and Kokko, 1997; Jensen, 2003). Experts argue that FDI has the ability to argument the two gaps as identified in the literature vis-à-vis: the savings gap and the foreign exchange gap. More importantly, the desired savings to meet up with the desired investment is a mirage to most sub-Saharan African countries and this calls attention for external capital inflow to...

Working Paper 248 - Farmers’ Vulnerability to Climate Shocks: Insights from the Niger Basin of Benin

Climate change and variability constitutes a serious global environmental issue (Hare et al., 2011; Vincent and Cull, 2014). Thus, the occurrence of climate shocks and extreme climatic events such as floods, droughts, strong winds, heat waves, earthquakes, hurricanes is widespread.2 The Fifth Assessment Report (AR5) of the Intergovernmental Panel on Climate Change (IPCC, 2014) stated that climate shocks will likely have an overall negative effect on agricultural production in many African countries and regions, and this could lead to food insecurity and malnutrition exacerbation.

Working Paper 249 - Threshold Effects of Inflation on Economic Growth in Africa: Evidence from a Dynamic Panel Threshold Regression

Examining the relationship between inflation and economic growth has been the subject of considerable theoretical and empirical research since understanding the inflation-growth nexus is very important for monetary policy (Seleteng et al., 2013). Traditionally, the relationship between inflation and economic growth is linear; the impact of inflation can be neutral, positive or negative depending on whether money is super-neutral (Sidrauski, 1967), substitute for capital (Mundell, 1965; Tobin, 1965) or complementary to capital (Stockman, 1981; Fischer, 1983).

Working Paper 246 - Why is inequality high in Africa?

Available evidence suggests that Africa is the second most unequal continent in the world next to Latin America (e.g. Ravallion and Chen, 2012). High inequality also seems to have persisted overtime with no visible sign of declining (Bigsten, 2014; Milanovic, 2003). Paucity of data at the household level in repeated waves for many countries prevented any systematic analysis on the underlying determinants of inequality in Africa. Previous attempts based on cross-country panel data indicate ethnic fractionalization as a robust determinant of income inequality in Africa (Milanovic, 2003). While...

Working Paper 247 - Credit constraints and farm productivity: Micro-level evidence from smallholder farmers in Ethiopia

Access to credit and other financial services by small-scale farmers has been considered as one promising way to reducing poverty, improving farm productivity, and easing a smooth transition from subsistence farming to large scale and agribusiness farming (Feder, Lau, Lin, & Luo, 1990; Sial & Carter, 1996; Carter & Olinto, 2003; Foltz, 2004). Indeed, in the shortrun, credit can help farmers increase their purchasing power to acquire necessary production inputs and finance their operating expenses while in the long run it can improve farmers’ ability to make profitable investments...

Working Paper 245 - Sectoral credit concentration and bank performance in Zambia

One of the hallmarks of Zambia's economic policies initiated in the early 1990s was the removal of administrative controls on credit allocation and in setting of interest and exchange rates. The reforms also entailed improvement of supervisory and regulatory framework governing the financial sector in general and the banking industry in particular. Prudential regulation and supervision framework has been strengthened, and banks’ setting of interest rates is now determined by risk-return considerations. Over the past three decades, significant progress has been made with regards to the...

Working Paper 228 - Overborrowing and Balance of Payments Imbalances in a Monetary Union

The most prominent feature of the Euro area crisis has been the large current account deficits and the large amount of debt accumulated by countries at the periphery. These imbalances are commonly attributed to differences in competitiveness as manifested in persistent differences in the unit labor costs. This paper takes a different perspective in line with empirical evidences. It argues that in order to understand imbalances within the euro area, it is necessary to consider the lower real cost of credit for high inflation countries in a monetary union as well as the inflow of capital to the...

Working Paper 243 - Selling crops early to pay for school: A large-scale natural experiment in Malawi

Crop prices in sub-Saharan Africa exhibit substantial seasonal fluctuations. The nominal prices of some crops increase by as much as 50–100% from their harvest-season trough to their lean-season peak (Burke, 2014; Kaminski, Christiaensen and Gilbert, 2014). These regular and largely predictable price changes o↵er farmers a profitable opportunity. Those who can a↵ord to delay selling crops until prices rise during the lean season enjoy returns that often exceed those available through savings groups or other financial mechanisms.

Working Paper 244 - Occupational choice and agricultural labor exits in Sub-Saharan Africa

Economic development is characterized, almost universally, by rising output per agricultural worker and the movement of labor from agriculture to other sectors, which together result in rising incomes and falling incidence of poverty (Timmer 2009). African countries are mostly in the early stages of this structural transformation process, with large cross-sector productivity gaps and large labor shares still in agriculture (Gollin, Lagakos, and Waugh 2014). Recently, though, growth has been observed in annual output per worker across SubSaharan Africa. In the aggregate, labor exits from...

Working Paper 241 - Long term consequences of consumption seasonality

A large literature in economics and other fields has established a link between nutrition during childhood and long-run development. Across the world, children with poor nutritional status are less likely than their well-nourished peers to grow up to be tall, well-educated, and economically productive adults (Victora et al., 2008). Randomized trials and convincing natural experiments have demonstrated causal pathways linking early life undernutrition to adverse adult outcomes as measured by height (Martorell, 1995; Kinra et al., 2008), cognition (Pollitt et al., 1993), and wealth (Mancini and...

Working Paper 242 - Understanding the prospective local content in the petroleum sector; and the potential impact of high energy prices on production sectors and household welfare in Uganda

Following the discovery of oil and the enactment of the 1993 Petroleum Exploration and Production Act, many Ugandans are predicating their future on the anticipated benefits from oil. Consistent with this expectation, the goal of the 2008 oil policy is to use the country’s oil and gas resources towards poverty eradication and creating lasting value to society. The ultimate objective of the oil and gas policy is to develop the local content which is the transmission mechanism of the benefits from oil activities to the local economy. Local content includes among others the development and...

Working Paper 240 - The Impact of the Real Exchange Rate Changes on Export Performance in Tanzania and Ethiopia

This paper investigates the impact of real exchange rate changes on the export performances of Ethiopia and Tanzania. Both countries have gone through a process of liberalisation including significant changes in both the nominal and real exchange rate. In the case of Tanzania, the exchange rate liberalisation process started in 1982 with a 10% currency devaluation followed by further devaluations by 20% and 26% in 1983 and 1984 respectively1 . These devaluations were regarded by aid donors to be insufficient to deal with the problem of overvaluation and resulted in a stand-off period before...

Working Paper 239 - Concept and measure of inclusive health across countries

Health is a particular pressing issue to address in such developing regions as Sub-Saharan Africa, where drinking water is often scarce if not contaminated, life expectancy at birth was only 58.6 years in 2014, below the World average of 71.5 years, and where the prevalence of maternal mortality ratio was 454 per 100 000 compared to the world average of 169 (World Bank, online). Various models in the literature analyzing the sources of economic growth have shown that health is a major determinant of economic growth (Bloom et al., 2004; Hamoudi and Sachs, 2000; Barro and Sala-i-Martin, 1995),...

Working Paper 238 - Impact Evaluation in a Landscape: protected natural forests, anthropized forested lands and deforestation leakages in Madagascar’s rainforests

Human beings have been modifying tropical forests for tens of thousands of years. Between 2000 to 2012 alone, an estimated 2.3 million square kilometers of forests have been lost worldwide (Hansen et al., 2013). These forests have been transformed mainly into agricultural lands (Kissinger and Herold, 2012) but also into anthropized forested landscapes that supply direct ecosystem services to locals (construction wood, fuelwood, charcoal, etc), resulting in the development of many human-modified mosaic landscapes.

Working Paper 237 - Decomposing Sources of Productivity Change in Small-Scale Farming in Ethiopia

Agriculture in Ethiopia is the key sector accounting for the bulk of the gross domestic product, employment, foreign exchange earnings, and tax revenue (Chavas and Di Falco, 2012). The pattern and pace of growth of the sector consequently have significant ramifications for the overall economic growth rate and the rate of poverty reduction that can be achieved. In recent years, the sector has registered growth, which was mainly driven by area expansion, with some contributions from improved terms of trade of farm commodities. Given the limited options for expanding the land frontier—...

Working Paper 236 - Estimating Development Resilience: A Conditional Moments-Based Approach

Over the past several years, natural disasters, food price and macroeconomic shocks, and conflict have prompted recurring humanitarian emergencies in many of the world’s lowest income countries. In direct response, international development and relief agencies have become preoccupied with the concept of resilience, committing increasingly large amounts of funding, programming, and research toward “building resilience.” They struggle, however, to develop methods to implement the concept empirically so as to guide policy and project design, measure progress, and evaluate interventions. At the...

Working Paper 235 - Social Networks, Agricultural Innovations, and Farm Productivity in Ethiopia

Eighty-two percent of the population in Ethiopia live in rural areas (World Bank, 2012), with the majority depending on agriculture or related activities for their livelihood, either directly or indirectly. Despite some improvements in agricultural production in recent years, overall agricultural growth falls short of the rapid population growth and importing food (in the form of aid and to some extent commercial imports) has become an important component of food supply in the country with an equivalent of 6.4% of the national food production between 1996 and 2010 on average (Graham et al,...

Working Paper 234 - The Unintended Consequences of Agricultural Input Intensification: Human Health Implications of Agro-chemical use in Sub-Saharan Africa

Modern agricultural inputs – like inorganic fertilizer and agro-chemicals – potentially help farmers boost productivity significantly, a goal critical to structural transformation and poverty reduction, particularly in regions like Sub-Saharan Africa (SSA). Recent panel data analysis, for example, identifies a strong causal relationship between the use of modern agricultural inputs and crop yields and, subsequently, yields and economic growth (McArthur and McCord 2014). While this link has long been well-theorized in the agricultural development literature (Johnson, Hazell, Gulati 2003;...

Working Paper 233 - Technology Adoption and Risk Exposure among Smallholder Farmers: Panel Data Evidence from Tanzania and Uganda

In most developing countries, increasing agricultural productivity is the overarching goal of policy makers and their development partners. Especially for sub-Saharan African (SSA) countries where half of the population lives in poverty, technological changes in the agricultural sector are often considered as one of the key pathways for fighting food insecurity, spurring economic growth, overcoming extreme poverty, and improving populations’ wellbeing. Indeed, in many of these countries, the majority of households still live in rural areas and depend on agricultural activities as their main...

Working Paper 232 - Remittances and Access to rural credit markets Evidence from Senegal

Migration and remittances play a crucial role in developing countries; for instance, there are around 30 million African who account for 3% of the population in Africa who have migrated internationally-including intra-Africa migration. Remittances represent two-thirds of the size of aid flows to sub-Saharan Africa. In most low-income countries of sub-Saharan Africa they exceed private capital flows such as foreign direct investment (FDI). International migrants' transfers are estimated at $40 billion which represented 2.6% of Africa GDP in 2010. In Senegal, remittances are one of the main...