I am an applied economist with more general research interests in finance and growth economics. My research is broadly macro, largely motivated by contemporary policy related issues. At the moment, my research interest has over the years focused on the dynamic linkages between macroeconomic policies and financial sector development in particular and how they uniquely affect economic growth.
Research Items (42)
We re-examine the law–finance theory relying on 33 countries in sub-Saharan Africa over the period 2004–2011. Our evidence suggests that legal origin significantly explains cross-country differences in financial development and economic volatility. More importantly, relative to civil law, English common law countries and those in Southern Africa have higher financial sector development both in terms of financial activity and banking efficiency on the back of lower volatility. While private credit bureau positively (negatively) affects financial development (economic volatility) with economically large impact for English legal legacy countries, the latter effect is contingent on the form of legal origin suggesting that, the establishment of information sharing offices per se may be insufficient in taming growth vagaries.
- Dec 2017
The impact of financial development on economic growth has received much attention in recent literature. However, there are potential discontinuities mediating finance–growth nexus that existing empirical studies have not rigorously examined. This study investigates whether the impact of finance on economic growth is conditioned on the initial levels of countries’ income per capita, human capital and financial development for 29 sub–Saharan Africa countries over the period 1980–2014 using a sample splitting and threshold estimation technique. Our findings suggest that, while financial development is positively and significantly associated with economic growth, below a certain estimated threshold, finance is largely insensitive to growth while significantly influencing economic activity for countries above the thresholds. The main conclusion drawn is that higher level of finance is a necessary condition in long run growth and so are the overall level of income and human capital.
This study examines the determinants of financial sector development in Africa relying on data for 46 countries spanning 1980–2015 using the system generalized method of moments. More importantly, we investigate the issue of whether the interaction of trade openness and human capital can explain financial development. Our findings show that, while human capital robustly influence financial development, trade openness robustly matter more for private credit than domestic credit. The interactive terms of openness and human capital are significantly related to financial development. Evaluation of the marginal effects reveal that trade openness (human capital) has greater impact on private (domestic) credit than human capital (trade openness). Our evidence largely suggests that human capital accumulation and trade openness are substitutable in influencing financial development in Africa.
This paper examines the overall economic growth effect when the growth in finance and real sector is disproportionate relying on panel data for 29 sub-Saharan African countries over the period 1980-2014. Results from the system generalized method of moments (GMM) reveal that, while financial development supports economic growth, the extent to which finance helps growth depends crucially on the simultaneous growth of real and financial sectors. The elasticity of growth to changes in either size of the real sector or financial sector is higher under balanced sectoral growth. We also show that rapid and unbridled credit growth comes at a huge cost to economic growth with consequences stemming from financing of risky and unsustainable investments coupled with superfluous consumption fueling inflation. However, the pass-through excess finance-economic growth effect via the investment channel is stronger.
- Mar 2019
Previous empirical studies on the causal relationship between financial development and economic growth are not instructive given their failure to unearth the causality trend across the different time periods. Using a more recently developed and robust indicator of financial development, we revisit the causal relationship between financial development and economic growth within the framework of a frequency domain spectral causality technique which allows the causality to vary across time. Using data from 47 African countries over the period 1980–2016, our findings largely suggests that, even though there is some evidence of demand–following, supply–leading and feedback hypotheses, for most part, we find strong support of neutrality hypothesis. Thus, financial development and economic growth at most frequency levels evolve independently. We infer that, caution must be exercised in making general conclusions about the causal nexus between financial development and economic growth.
Earlier studies on the impact of foreign direct investment (FDI) on economic growth have not been instructive largely on their failure to examine the sectoral transmission channels through which FDI affects overall growth. We re–examine the impact of FDI on economic growth in Africa relying on panel data from 38 African countries over the period 1960–2014. Results from the system generalised method of moments (GMM) reveal that, while FDI positively and unconditionally spurs economic growth, its growth–enhancing effect is imaginary when the conditional sectoral effects are introduced. On the channels of manifestation, we notice that the pass–through impact of FDI is only significant for the agricultural and service sectors and for most part, negative for the manufacturing sector albeit insignificantly. These findings are robust to model specifications. We discuss some key implications for policy.
In this paper, we apply a battery of stochastic copulas to determine the tail distribution and contagion risk-sharing relationship between eight stock markets and gold returns. We find evidence of a significant co-jump of gold and stock market returns. This is in sharp contrast to the safe-haven and diversification attributes of gold. We assume that different stock markets may have sectoral compositions that weigh certain commodities higher, gold in particular, and that investor attitudes may be driven by herd behaviour. Our conclusion is that establishing a positive average dependence between gold and equity returns cannot be completely misguided.
- Nov 2018
Purpose This study examined the interactive effect of human capital in financial development–economic growth nexus. Relative to the quantity-based measure of enrolment rates, our main aim was to determine how quality of human capital proxied by pupil–teacher ratio influences the relationship between domestic financial sector development and overall economic growth. Design/methodology/approach Data is obtained from the World Development Indicators of the World Bank for 29 sub-Saharan African (SSA) countries over the period 1980–2014. The analyses were conducted using the system generalized method of moments (GMM) within the endogenous growth framework while controlling for country-specific and time effects. We also follow Papke and Wooldridge (2005) procedure in examining the long run estimates of our variables of interest. Findings Our key finding is that, while both human capital and financial development unconditionally promotes growth in both the short and long run, results from the interactive terms suggest that, irrespective of the measure of finance, financial sector development largely spurs growth on the back of quality human capital. This finding is also confirmed by the marginal and net effects where the interactive effect of pupil–teacher ratio and indicators of finance are consistently huge relative to the enrolment. Statistically, the results are robust to model specification. Practical implications While it is laudable for SSA countries to increase access to education, it is equally more crucial to increase the supply of teachers at the same time improving on the limited teaching and learning materials. Indeed, there are efforts to develop the rather low levels of the financial sector owing to its unconditional growth effects. Beyond the direct benefit of finance however, higher growth effect of finance is conditioned on the quality level of human capital. The outcome of this study should therefore reignite the recognition of the complementarity role of human capital and finance in economic growth process. Originality/value The study makes significant contributions to existing finance–growth literature in so many ways: First, we extend the literature by empirically examining how different measures of human capital shape the finance–economic growth nexus. Through this we are able to bring a different perspective in the literature highlighting the role of countries’ human capital stock in mediating the impact of financial deepening on economic growth. Second, we make a more systematic attempt to evaluate the relative importance of finance and human capital in growth process while controlling for several ancillary variables.
The existing literature highlights the determinants of trade openness with disregard to the income classifications of countries in examining whether the determinants differ given their income levels. This study therefore re–examines the determinants of trade openness in Africa relying on panel data with special focus on the role of economic growth. More specifically, we perform a comparative analysis of the factors influencing trade openness for low income and lower middle income countries using the system generalized method of moments. Our findings suggest that, while economic growth robustly enhances openness in low income countries, in the case of lower middle income countries, the impact is not robust and largely negative suggesting that higher growth is associated with less openness. We also find that, economic growth–openness nexus for the lower income countries exhibits non–linearities and inverted U–shaped relationship in particular. Thus, while increases in real GDP per capita enhances openness, beyond an estimated threshold point, any increases in economic growth dampens openness. We discuss key implications for policy.
We present evidence that both the bank– and market–based financial sector development in Africa diverge over time. However, the speed of divergence is robust and rapid with the unconditional bank–based measure and private credit in particular.
Purpose The paper aims to investigate empirically the impact of corporate social responsibility (CSR) on financial performance in South African listed firms. Design/methodology/approach The paper uses panel corrected standard errors to estimate the effect of CSR on firm financial performance and thus addresses contemporaneous cross-correlations across the panel cross sections. The study uses a broad base measure of CSR created by the Public Investment Corporation data set and the combination of accounting and economic means of measuring firm financial performance. Findings CSR is found to have a strong positive impact on firm financial performance in South Africa. When CSR is decomposed further into its major components, governance performance positively impacts a firm’s financial performance with no evidence of any relationship between social components and firm performance and between environmental components and firm performance. The positive impact of CSR on firm performance is greater in big firms. At the industry level, CSR is noticed to impact positively on financial performance in the extractive industry via good governance and responsible environmental behaviors. It however has no impact on firm performance in the financial sector. Research limitations/implications The results should be interpreted with caution and some limitations. Due to the limiting nature of the Public Investment Corporation data set (the survey was carried out on selected firms on the Johannesburg Stock Exchange for three years spanning from 2011 to 2013). This resulted in a sample of 56 firms. It is therefore very problematic to generalize the findings to a larger population over a long period of time. This is more limiting especially on individual sector studies where the sample has further shrunk to a smaller sample. As a result of the smaller sample size, the authors were unable to explore some other sectors which could have given more revealing findings. The authors recommend that future research should explore other data sets or use primary data approach that can allow for more sample size and elongated time period for a more holistic view and for easy generalization of the findings. The authors also identify an important lacuna necessitating further research effort. It would be interesting to empirically examine the threshold point of firms’ size beyond which CSR damages firms’ performance. Knowledge of this will guide managers of firms in their strategic CSR decision. Practical implications This study does not only serve as a reference work for subsequent investigations into the impact of CSR on firm performance in sub-Saharan Africa but also serves as a guide to policymakers on the financial impact of CSR adoption. Originality/value This study is one of the pioneering works that comprehensively examines the effect of CSR on financial performance amongst South African firms via size and sector and also controls for contemporaneous cross-correlation effects from the firms in the panel set.
For most part, extant studies on financial development–domestic capital–economic growth nexus have assumed a symmetric link through the imposition of linear specifications. However, such relationships do not account for possible asymmetries in the impact of finance on economic growth. This study employs a recently developed Nonlinear Autoregressive Distributed Lag (NARDL) approach to cointegration in examining asymmetric effects of financial development on economic growth in four ECOWAS countries (Burkina Faso, Cote d’Ivoire, Ghana and Guinea–Bissau) while controlling for domestic capital. Our findings reveal the existence of long run asymmetric relationship in all the countries. While positive and negative shocks to financial development shows varying long and short run effects on economic growth, a positive (negative) domestic capital shock consistently increases (decreases) economic growth for majority of the countries. Our evidence therefore confirms the significance of asymmetries in examining such relationships.
In this study, we are interested in the effects of exports, and export diversification on sectoral value addition measured as the value added in the agriculture, industry and services sectors in sub-Saharan African (SSA) countries. Using a panel of 29 SSA countries with consistent annual data from the World Bank over the period 1996-2010, and generating a 3-year non-overlapping average of the annual data, we estimate the impact of exports and exports diversification on real value added in industry, agriculture and services sectors; labor productivity, and conditional labor demand (employment) while using the two-step system GMM estimator. First, we find that exports have a strong positive impact on value added in manufacturing, services, and agriculture sectors and labor productivity but not employment in the sub-region. Second, we find again that exports diversification increases value added in manufacturing, services, and agriculture sectors and labor productivity. Interestingly, as expected, we show through an investigation into the interaction between exports, and export diversification how the positive effect of exports on value added in manufacturing and services sectors is magnified the more diversified in exports of goods and services of countries in our sample are. Contrary to our expectation, however, we find a positive effect of exports on employment the more concentrated in exports (instead of diversified). Finally, an attempt is made to reveal the relative importance of extensive exports diversification (export volume) and intensive exports diversification (export value addition) on value-added in all three sectors, labor productivity and employment. The findings suggest that SSA countries should encourage a dual strategy of export diversification in both export value addition and market share to accelerate economic growth and employment. We can confirm these results using different measures of export diversification.
Earlier studies on the causal relationship between Information, Communication and Technology (ICT) and financial development have relied on a time domain approach which does not distinguish among the various forms of causality at the different time periods. In this study, we re–examine the causality nexus between ICT infrastructure and domestic level of financial development in 19 selected countries in Africa using a frequency domain spectral causality test technique that corrects the weaknesses eminent in the existing studies. Our findings suggest that, for most frequency levels, ICT infrastructure and domestic level of financial development in several countries are completely independent confirming the neutrality hypothesis. This holds irrespective of the measure of ICT and finance. We also find evidence to support the demand–following hypothesis, supply–leading hypothesis and feedback hypothesis at different time periods for the different countries under study. Given the findings, we argue that, the causal relationship between ICT and financial development is not straightforward as suggested by the existing studies. In addition to indicator of ICT and finance, the extent to which countries’ ICT infrastructure relates with their domestic financial sector development is contingent on whether the country is operating in the short, intermediate or long run.
- May 2018
This study empirically examines the factors influencing monetary and non–monetary poverty in addition to determining whether the impact of shocks, government social protection programmes and their interactions on the measures of poverty differ. We rely on primary data from 395 households in Upper West region of Ghana to construct a multidimensional non–monetary measure of poverty using the Multiple Correspondence Analysis (MCA) while invoking instrumental variables estimation approaches that deal with potential endogeneity eminent in poverty studies. Our results reveal varying determinants of both measures of poverty. We find that, gender matters more for non–monetary poverty than monetary poverty while household size and educational level robustly influences only monetary poverty. Age weakly affects only non–monetary poverty albeit non–linear. Access to microcredit, savings and gainful employment individually reduces household poverty while improving welfare. Job insecurity accelerates poverty irrespective of the measure while remittance and financial inclusion are exceedingly crucial for only non–monetary poverty. Although crop loss and idiosyncratic risks increase household poverty, they mean less for non–monetary poverty. In addition to finding weak impact of government social protection programmes on poverty, we also do not find any dampening effect of such programmes on household shocks. We discuss key implications for policy.
Overtime, the policy to enhance financial inclusion at the national and household or individual levels has coincided with the increasing need for non-farm enterprises in addition to mainstream farming due to climate change and as an income diversification strategy. Using data from the sixth round of the Ghana Living Standards Survey, this chapter examines the influence of financial inclusion on growth of non-farm enterprises. We construct a multi-dimensional measure (index) of financial inclusion relying on 14 indicators while employing an instrumental variable approach in examining financial inclusion–firm growth nexus. Our evidence suggests that improvement in non-farm entrepreneurs’ level of financial inclusion is growth enhancing with higher probability in the urban relative to rural areas. At the policy level, strategies targeted at boosting financial inclusion will not only spur firms’ growth but also expand these enterprises and hence improve tax revenue for the economy as a whole.
- Mar 2018
Undoubtedly, efforts aimed at encouraging Foreign Direct Investment (FDI) inflows in Africa have not impressively yielded the desired results. Empirically, apart from the macroeconomic and political factors, studies on the drivers of FDI have not been rigorous in examining whether recent advances in the continent’s Information, Communication and Technology (ICT) infrastructure and domestic financial development have any role in attracting foreign capital. In this study, we re–examined the determinants of FDI inflows with special attention to the ICT and financial sector environments. By relying on panel dataset of 46 countries in Africa over the period 1980–2016, evidence from our two-step system generalized method of moments (GMM) shows that well–developed ICT infrastructure robustly spurs FDI irrespective of the measure of ICT. On the other hand, the impact of domestic financial sector development on FDI is conditioned on the proxy of finance. Specifically, while domestic (private) credit to GDP inhibits (promotes) foreign capital inflows, higher levels of ICT environment dampen the deleterious effect of finance on FDI. We document the threshold levels of ICT necessary for exacting such dampening effects.
Question - Could someone suggest a statistical package to estimate "Hansen's Threshold Regression" where threshold level is endogenously determined?
Use the STATA command "thresholdreg" to estimate the 2 regime parameters after "thresholdtest" to test for the presence of a threshold.
- Aug 2017
- 2nd African Review of Economics and Finance (AREF) Conference, GIMPA Business School, 30-31st August, 2017, Accra, Ghana
We re–examine the law–finance theory relying on 33 countries in sub–Saharan Africa (SSA) over the period 2004–2011. Our evidence suggests that legal origin significantly explains cross–country differences in financial development and economic volatility. More importantly, relative to civil law, English common law countries and those in Southern Africa have higher financial sector development both in terms of financial activity and banking efficiency on the back of lower volatility. While private credit bureau positively (negatively) affects financial development (economic volatility) with economically large impact for English legal legacy countries, the latter effect is contingent on the form of legal origin suggesting that, the establishment of information sharing offices per se may be insufficient in taming growth vagaries.
- Aug 2017
- 2nd African Review of Economics and Finance (AREF) Conference, GIMPA Business School, 30-31st August, 2017, Accra, Ghana
Earlier studies on the threshold effects of inflation on economic growth have ignored the role of mediating variables in shaping inflation–growth nexus. In this study, we examine whether such relationship is contingent on broad money supply, government expenditure, net exports and inflation using Ghana as a case. By relying on annual data spanning 1965–2013 and invoking the sample splitting and threshold estimation approach, our results suggest that inflation–growth nexus is refereed by the level of broad money supply. While inflation negatively affects overall growth, our evidence shows that, inflation significantly inhibits economic growth when broad money supply exceeds a threshold of 21.57% of GDP. Below this threshold, the impact of inflation is benign. Further findings from the Granger causality tests show a unidirectional causality running from economic growth to inflation and not the vice versa. We discuss key implications for policy.
- Aug 2017
This article examines the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African (SSA) countries for the period 1983-2014. Findings from the system-generalised methods of moments (GMM) show that, while foreign aid significantly drives sectoral growth, aid volatility deteriorates sectoral value additions impacting heavily on non-tradable sectors with no apparent effect on the agricultural sector. The deleterious effect of aid volatility on sectoral value additions in SSA is weakened by a well-developed financial system with significant impact on the tradable sector. Evidently, development of domestic financial markets enhances aid effectiveness.
Overtime, the policy to enhance financial inclusion at the national and household or individual levels has coincided with the increasing need for non-farm enterprises in addition to mainstream farming due to climate change and as an income diversification strategy. Using data from the sixth round of the Ghana Living Standards Survey, this chapter examines the influence of financial inclusion on growth of non-farm enterprises. We construct a multi-dimensional measure (index) of financial inclusion relying on 14 indicators while employing an instrumental variable approach in examining financial inclusion–firm growth nexus. Our evidence suggests that improvement in non-farm entrepreneurs’ level of financial inclusion is growth-enhancing with higher probability in the urban relative to rural areas. At the policy level, strategies targeted at boosting financial inclusion will not only spur firms’ growth but expand these enterprises and hence improve tax revenue for the economy as a whole.
Using the Autoregressive Distributed Lag (ARDL) framework, this paper examines the relevant factors influencing allocation of bank credit to the private sector in the Ghanaian economy for the period 1970 to 2011. The results show that broad money supply, bank assets, real lending rate, and bank deposits are significant determinants of bank credit in both the short and long-run. Inflation also exerts significant positive impact only in the short-run. The study infers the lack of successive governments’ commitment to pursue policies that boost the supply of credit to the private sector. Our findings further reveal that increases in deposits mobilization by banks does not necessarily translate into supply of credit to the private sector. A plausible deduction from the findings is that reduced government’s domestic borrowing, lower cost of borrowing, and lower central bank reserve requirements for commercial banks in Ghana are needed to stimulate higher lending and credit demand.
- Mar 2017
What drives exchange rate volatility, and what are the effects of fluctuations in the exchange rate on economic growth in Ghana? These questions are the subject matter of this study. The results showed that while shocks to the exchange rate are mean reverting, misalignments tend to correct very sluggishly, with painful consequences in the short run as economic agents recalibrate their consumption and investment choices. About three quarters of shocks to the real exchange rate are self-driven, and the remaining one quarter or so is attributed to factors such as government expenditure and money supply growth, terms of trade and output shocks. Excessive volatility is found to be detrimental to economic growth; however, this is only up to a point as growth-enhancing effect can also emanate from innovation, and more efficient resource allocation.
- Jan 2017
In addition to the standard Granger causality, this paper employs the Toda–Yamamoto approach and instantaneous causality test to examine the causal relationship between domestic savings and economic growth in 10 sub–Saharan African countries utilizing time series data. Findings from both the standard Granger causality and Toda–Yamamoto approach are consistent and robust only in 5 countries where domestic savings and economic growth are completely independent in 3 countries. For the remaining 2, causality runs from savings to growth. However, for the other 5 countries, findings produced from both causality tests are grossly inconsistent and mixed leaving us under a quandary although the Toda–Yamamoto test is often reliable on account of its ability to avoid misleading results associated with the asymptotic nature of the standard Granger causality test. Our findings further reveal an instantaneous unidirectional causality from domestic savings to economic growth for only Benin, Mali and South Africa suggesting that savings–led growth is rapid for these countries. We conclude based on our findings that the myriad of ‘evidence’ in earlier studies on savings–growth causality should be treated with caution given that methodological differences can produce misleading results with the potential of misdirecting policy.
- Dec 2016
Households in several sub–Saharan African countries including Ghana usually have to cope with poverty, income and consumption volatility by diversifying their income sources. Using the recent wave of the Ghana Living Standard Survey (GLSS 6), we examine the determinants of participation in farm employment as an income diversification strategy and its impact on welfare in the poorest regions of Ghana. Our findings show that marital status, household size, education and access to credit are important drivers of participation in farm work albeit regional differences. The effect of age on participation decision is intrinsically non–linear in an inverted U–shaped fashion. Further findings from the propensity score matching reveal that engaging in farm employment positively and significantly impacts on welfare. While we recommend substantial investment in the agriculture sector, it is simplistic to assume that the resource allocation in itself will engender the needed agricultural productivity and ultimately translate into improved welfare. Moreover, while the obsession with agricultural–led growth as a poverty reduction strategy has genuine merits, we submit that non-farm activities also make substantial contributions to household welfare and can play significant roles in transforming northern Ghana.
- Aug 2016
- African Review of Economics and Finance Conference
The role of financial sector development in economic growth has been well documented in the literature although extant studies on the relationship remain inconclusive. Earlier studies are also silent on the effect on economic growth via the interaction of the real and financial sectors. What is the effect on economic growth when credit growth outstrips the solvency needs of the real sector, and how does this impact on growth? Using the system generalized methods of moments (GMM), we answer these questions by relying on panel data for 29 sub–Saharan African countries over the period 1980–2014. Our study finds that more than two–thirds of the countries have experienced at least one episode of excessive credit growth relative to real sector needs. While financial development supports economic growth, the extent to which finance helps growth depends crucially on the simultaneous growth of real and financial sectors. The elasticity of growth to changes in either size of the real sector or financial sector is higher under balanced sectoral growth. We also show that rapid and unbridled credit growth comes at a huge cost to economic growth with consequences stemming from financing of risky and unsustainable investments coupled with superfluous consumption fueling inflation. However, the pass–through excess finance–economic growth effect via the investment channel is stronger. We argue that, sound innovation, information technology and optimal finance bring dynamism to the real sector. A good understanding of the optimal level of credit consistent with long run economic growth is also needed as existence of an undisturbed equilibrated growth of real and financial sectors is a necessary condition for a smooth economic growth. By introducing a previously missing link, our findings resolve the seemingly conflicting and highly contested results in the finance–growth literature.
- Dec 2015
Purpose – This paper aims to investigate the determinants of the motivation to pay tax in Ghana. Traditionally, raising tax morale to ensure compliance is often tied to the level of prevailing enforcement. But beyond enforcement, why do citizens pay tax? Design/methodology/approach – This paper relied on the sixth wave of the World Values Survey data in determining the drivers of tax morale. It used the probit model with different specifications to determine robustness of the results. Findings – The findings remain robust to model specification and show a non-linear relationship between age and tax morale. The level of education, marital status, patriotism, sector of employment, satisfaction with democracy and one’s “fear of God” do not matter in tax morale. The economic class of a person per se is also far from being a significant driver and that people are intrinsically motivated to pay tax once they are satisfied with their financial situation, have trust in the government as well as confidence in the parliament. Originality/value – In addition to being a pioneering micro-econometric work on the determinants of tax morale in Ghana, the main contribution of the study lies in its investigation of a non-linear relationship between age and tax morale in Ghana.
Corruption is a pervasive challenge confronting the world more especially countries in sub-Saharan Africa. This paper investigates the effect of corruption on economic growth in the sub-region using data spanning 1998 to 2011. By employing the pooled estimated generalized least squares (EGLS) and two-stage least squares (2SLS), we find that corruption is inimical to economic growth through its indirect effect on gross fixed capital formation and labour force. The results are not only robust to controlling for endogeneity using regional blocs as instruments in the 2SLS estimations but identifies government expenditure as additional pass-through effect of corruption on growth. Our findings suggest that for countries within the sub-region to achieve sustained economic growth, control of corruption must take precedence over the design and implementation of any macroeconomic policy. Campaign against corruption does not only improve on institutional quality but is by far growth–enhancing.
- Apr 2015
This paper investigates whether or not gold provides a perfect hedge against inflation and exchange rate in Ghana relying on data spanning 1990–2012. In addition to applying a unit root testing approach robust for finite samples, we employed the Johansen multivariate cointegration test procedure and vector error correction model (VECM). Our findings suggest that for long-term investors, gold could provide an imperfect hedge against inflation and exchange rate. We however established that the latter effect is minuscule. On the contrary, gold does not provide any hedge if held for only short-term. Irrespective of the time horizon, economic growth negatively affects gold prices suggesting that people diversify their portfolios when incomes increase. The study also discusses some policy implications.
Question - What does the negative number explain in domestic private investment growth?
This is possible if people (and perhaps) governments either dis-save or are initial borrowers. The latter may be in response to low interest rates accompanied by high consumer prices. In this regard people spend more on consumer goods relative to investment.
Question - Can anyone comment on variance decomposition or impulse results and its main roles for policy implications?
It explains the relative importance of each exogenous shock to variables in total variance error of the endogenous variable. It also shows the strength of the endogenous variable in accounting for its own variance.
- Sep 2014
Compared to urban areas, a satellite picture of rural areas at night is distressing. Bright lights are few and far between yet in the face of the Strategic National Energy Plan, Sustainable Energy for All Action Plan, the Ghana Energy Development and Access Project and Energy Sector Strategy and Development Plan is the energy sector vision which advocates for accessible energy for all households in Ghana. This paper investigates the factors that influence households’ choice of modern electricity in the West Mampurisi District of Ghana using a household survey data. Multi-stage sampling procedure was used to obtain 295 households for the study. The underlying empirical model was estimated using the Probit model. Contrary to widely held beliefs, the results of the Probit model revealed that cattle ownership which is a proxy for wealth/income is not a key determinant of household energy connectivity. Significant and positive variables included tenancy type, radio, TV and fridge ownership, perception about electricity, duration and cost of use of electricity. Government can support the development of alternative energy sources such as renewable energy or promote the entry of multiple players into the generation market to reduce the cost of supplying utility power to the rural communities, thus enabling affordability by every household.
- Jul 2014
The Millennium Development Goals (MDG) among other things have not only brought poverty reduction onto the global development agenda but have also urged countries to help halve poverty by 2015. Various policy initiatives have been implemented towards actualizing the first MDG. Ghana, through its policy programmes is at the verge of meeting MDG 1 well before 2015. One of such programmes is the Livelihood Empowerment Against Poverty (LEAP) which provides direct cash transfers to extreme poor and vulnerable. Do cash transfers add up to the agenda? By invoking a non-parametric chi-square test, we find evidence of the contribution of the cash transfer programme in LEAP-ing beneficiaries out of poverty by supplementing their income levels as well as improving their livelihoods. At least in our study area, we found a 29% decrease in the number of beneficiaries earning below the lower poverty line while 61% have been able to meet part of their basic needs. To ensure a continual reduction in poverty, we argue for the need to fundamentally go beyond short-term gains through co-ordinated, purposeful social and complementary services that will create opportunity for empowerment among the poor and vulnerable households.
- Apr 2014
Relying on more recent data spanning September, 2000 to September, 2010, this paper investigates the effects of macroeconomic variables on stock market returns by employing the Johansen multivariate cointegration approach and vector error correction model (VECM). We present evidence of a long-run relationship between macroeconomic variables and stock returns. Our Granger causality test however could not establish causality from any direction between macroeconomic variables and stock prices and that earlier literature that found causality between the series may be misleading. Results from both the impulse response functions and variance decomposition show that among the macroeconomic variables, shocks to inflation, money supply and exchange rate do not only explain a significant proportion of the variance error of stock returns but their effects persist over a long period.
Many studies have focused on examining the cointegration and causality between or among stock markets of different countries. This paper departs from these traditional inter-relationship studies through its investigation on the causality and cointegration between the Brazilian Stock Market (Bovespa) and a listed company (Petrobras) by employing the Granger causality test and error correction technique based on autoregressive distributed lag (ARDL) modelling approach to cointegration. We find empirical evidence of cointegration and that deviation from long-run equilibrium is corrected according to the speed of adjustment. In particular, a disequilibrium resulting from a shock to the stock market is corrected by 3.8% per week. Our findings also show a unidirectional causality running from Bovespa index to share price of Petrobras thus revealing the predictive power of the former. While our Granger causality finding is inconsistent with the preaching of efficient market hypothesis (EMH), it nonetheless fortifies the need for investors and financial analysts to closely monitor the movements of the Brazilian stock market index when investing (or analyzing changes) in Petrobras.
This paper explores the relationships between record keeping and business performance among SMEs in Ghana. Relying on a sample of 100 SMEs in the Tamale Metropolis, and employing simple regression analyses and Pearson Correlation Coefficient, we found a positive correlation between record keeping and business performance. In particular, we show that the two variables are linearly related. After swapping both the dependent and independent variables in the estimated models, we found a more robust impact on record keeping when it depends on business performance than when the latter depends on the former. We however could not show which variable causes changes in the other, necessitating further research efforts in this direction. While recognising the impact of record keeping on business performance, we conclude that at least in our study area, other performance metrics such as improved customer relations, access to sustainable finance, technology diffusion, and expanding the frontiers of access to internal and international markets are equally critical drivers of SME performance. This calls for conscious and coordinates efforts aimed at enhancing the performance of SMEs in Ghana.