Search

Begin New Search Topic Economic Growth Political Geography Africa Content Type Working Paper Publishing Institution United Nations University Publication Year within 10 Years

1. Macro-financial implications of public debt in South Africa: The role of financial regimes

Author:
Theshne Kisten
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines the role of financial frictions in the public debt–growth nexus, documenting that a public debt shock has different macro-financial implications dependent on the state of financial markets in South Africa. A non-linear vector autoregression model is estimated which allows the transmission mechanism to be characterized by two distinct financial regimes: stressful versus normal. The empirical results suggest that a public debt shock has a broadly insignificant impact on economic growth over the full sample, reflecting the ineffectiveness of government borrowing in stimulating the economy, and could suggest that the high and growing debt service costs faced by the government reduces funds available for investment purposes. Debt shocks are found to be deflationary in both regimes, lending support to the precautionary savings effect and the existence of a well-developed financial market, while interest rates decline with the immediate impact being moderately larger in the stress regime, providing evidence of the accommodative stance between fiscal policy and monetary policy. In response to a public debt shock, financial conditions show an immediate and transitory improvement in the high-stress regime; however, in the low-stress regime there is an immediate yet negligible improvement in financial conditions. Lastly, the responses evolve over time, with fiscal policy being less effective in stimulating the economy in the post-crisis period, but it has been effective in reducing financial stress in the high-stress regime.
Topic:
Economics, Finance, Economic Growth, and Public Debt
Political Geography:
Africa and South Africa

2. Absolute or relative: perceptions of inequality among young adults in Mozambique

Author:
Giulia Barletta, Ines A. Ferreira, and Vincenzo Salvucci
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Different concepts of inequality lead to different positions in discussions about whether economic growth leads to increasing inequality. This study investigates how over 1,100 young adults in Mozambique perceive inequality and whether their perceptions are based on relative or absolute terms. It follows the line of work which examines attitudes (perceptions and preferences) towards different distributional axioms, and focuses on scale and translation invariance. Most of our respondents believe that inequality in their neighbourhood is too high and that circumstances beyond their control explain why some people are poor. We conclude that, while some respondents think in absolute terms, many do not agree with either the scale-invariance or the translation-invariance axioms, and there is great variation depending on the scenario presented to the respondents. We find some correlation between their way of thinking and gender, but no clear link with level of education and type of employment.
Topic:
Education, Inequality, Economic Growth, Youth, and Gender
Political Geography:
Africa and Mozambique

3. The determinants of domestic saving in Kenya

Author:
Rodgers Musamali, Cecilia Mutia, and Rose Ngugi
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The savings–growth nexus is widely acknowledged, both in policy and in the literature. But Kenya’s numerous policy initiatives to encourage savings mobilization are yet to yield the expected outcomes. This paper identifies the key drivers of domestic saving in Kenya, exploiting fintech as an alternative channel for savings mobilization, and drawing lessons from the Kenyan experience so far. Using data from various sources, and employing an autoregressive distributive lag estimation model, we find that in the long run, private saving is positively and significantly influenced by the per capita income growth rate, inflation, and age dependency ratio, and negatively influenced by the public saving rate and terms of trade. National saving is positively and significantly influenced by the per capita income growth rate, inflation, and private sector credit growth rates in the long run. Wealth and deposit rates negatively influence national saving. Based on these findings, we recommend the following interventions to grow savings in Kenya: creating decent employment opportunities to enhance income growth; providing sustained financial development with a focus on savings mobilization; creating an enabling environment for the private sector; taking advantage of Kenya’s young population; exploiting mobile money platforms to boost savings. Moreover, households show targeted saving behaviour where they accumulate financial savings and then transform them into savings in kind. Therefore, accounting for savings should go beyond the traditional focus on bank deposits and incorporate savings held in other forms. Households also use non-formal platforms for saving, and we suggest that existing barriers to formal saving platforms be removed to direct more saving into formal channels.
Topic:
Economic Growth, Saving, Income, and Fintech
Political Geography:
Kenya and Africa

4. Does aid to the productive sectors cause manufacturing sector growth in Africa?

Author:
Alain Ndikumana
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In recent decades, Africa has received a large share of official development assistance compared to other regions of the world. Using AidData for 2000–13, this paper examines the effects of aid to productive sectors on manufacturing growth in Africa. Econometric results show that increased assistance to these sectors is associated with an increase in growth of the manufacturing sector, with complementary effects from allocations to economic services and infrastructures. However, dynamic panel regression results show a positive long-term link between increased official development assistance to productive sectors and growth of the manufacturing sector. These findings make an important contribution to the economic literature where there is controversy over aid effectiveness at the macro level. The findings also have policy implications for allocation of aid between sectors by making rational trade-offs related to their amount and quality, with emphasis on productive sectors where investment has a major impact on growth of the manufacturing industry.
Topic:
Humanitarian Aid, Economic Growth, Manufacturing, and Development Assistance
Political Geography:
Africa

5. Ethiopia – an agrarian economy in transition

Author:
Yared Seid, Alemayehu Seyoum Taffesse, and Seid Nuru Ali
Publication Date:
12-2015
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Ethiopia has experienced rapid economic growth since 2005. Real gross domestic product (GDP) grew at an average rate of 10.5 per cent per annum for the period between 2004–05 and 2013–14. Public investment in key infrastructure and interventions in the agriculture sector have made important contributions to GDP growth. This growth has been accompanied by a process of capital deepening and signs of structural shift away from traditional and primary sectors towards secondary and tertiary sectors. Both processes of high growth and structural shift have important implications for poverty reduction and income distribution. One potential channel through which these influences work is the labour market. The indications of structural transformation that Ethiopia has shown in the last decade, including a continuous decline in the role of agriculture and rise in that of services, have led to reallocation of jobs and labour from low-productivity agriculture to more productive industrial—in particular the construction sub-sector—and service sectors. The rise in total factor productivity, overall increase in labour force participation rate, and fall in the labour share of the agriculture sector are indicative of the nature and extent of structural shift in the Ethiopian economy. A more durable shift of economic activities towards the manufacturing sector is expected to follow the rising trend in investment in the sector. This study explores the impact of the high economic growth and slow but unmistakable structural change on a number of economic outcomes working through the labour market. The growth opportunities and challenges of the Ethiopian economy are also discussed.
Topic:
Infrastructure, Economy, Economic Growth, Investment, and Labor Market
Political Geography:
Africa and Ethiopia