African Journal of Economic Review <p>The <em>African Journal of Economic Review</em> (AJER) is a refereed, biannual Journal that publishes high quality and scholarly articles on economic issues relevant to Africa. &nbsp;The AJER is an applied journal with keen interest in the following areas: Public sector economics, monetary economics, international trade and finance, agricultural economics, industrial economics, development economics, labour economics, health economics, environmental economics and economic reforms.&nbsp;</p> <p>Other websites associated with this journal:&nbsp;<a title="" href="" target="_blank" rel="noopener"></a></p> <p>This journal has recently been accepted to be indexed&nbsp;in REPEC <a title="" href="" target="_blank" rel="noopener"></a></p> Centre for Economics and Community Economic Development en-US African Journal of Economic Review 1821-8148 The copyright belongs to: African Journal of Economic Review, Centre for Economics and Community Economic Development, The Open University of Tanzania, P.O.Box 23409, Dar es salaam, Tanzania What is the Cost of Political Instability in Tunisia? Evidence from 592 Private Firms <p>Using detailed firm-level data covering 592 firms in the private sector in Tunisia covering the period 2009-2012, this paper (i) examines the relationship between firm characteristics and their perception of the effect of political instability on their business operations, and (ii) tests whether political instability has had a negative effect on firm performance. Using ordered and binary probit/logit models, we find that (i) larger-sized firms are more likely to report political instability as a sever obstacle to their operations. Using OLS and an endogenous treatment linear regression models, we find that (ii) the perception of political instability is negatively associated with firm performance, and after correcting for endogeneity it can even have a negative causal effect on firms’ sales and employment growth, all else held constant. Results are largely robust to different specifications.&nbsp;</p> Amr Hosny Copyright (c) 2020-10-11 2020-10-11 8 3 1 19 An Empirical Appraisal of McKinnon’s Complementarity Hypothesis in Tanzania <p>The prediction of McKinnon’s Complementarity Hypothesis (McKinnon 1973) is that money and investment are complimentary due to self-financed investment and that the real interest rate is the key determinant of capital formation for financially repressed developing economies. Tanzania has experienced a long spell of financial repression as manifested in government putting caps or ceilings on interest rates, state ownership or control of domestic banks and financial institutions, heavy bank borrowing by government, restrictions on entry to the financial industry and directing credit to certain sectors and public entities. Although financial repression can facilitate economic development, for the case of most developing countries it is hypothesized by McKinnon (1973) and Shaw (1973) that it retards savings and investment and thereby inhibits capital formation and economic growth. This paper critically appraises the complementarity hypothesis in Tanzania by an empirical approach. The Autoregressive Distributed Lag (ARDL) model estimation results and the Bounds Test are supportive of the hypothesis, confirming basic complementarity between accumulation of money balances and investment. Higher real interest rates raise capital formation via the increase in real money balances. The policy implication is an exit from financial repression by achieving positive market determined interest rates in order to secure greater levels of investment.</p> A.A. L Kilindo Copyright (c) 2020-10-11 2020-10-11 8 3 20 48 The Impact of Inward Remittances on Economic Growth in Ghana <p>Ghana was the second largest recipient of remittances in West Africa after Nigeria in 2018, with an underlying economic growth rate which declined from 8.1 percent in 2017 to 5.6 percent in 2018 anchored on industrial-sector growth. The study re-examined the effect of inward remittances on economic growth in Ghana. The ARDL estimation technique is used to test for the relationship between remittances and economic growth, using annual data from 1970 to 2016. The traditional Granger causality test was also applied to explore the direction of causality between remittances and economic growth. The results revealed that remittances had a negative long-run effect on growth and a positive effect on economic growth in the short-run. The study found no granger causality between economic growth and remittances in Ghana for the period of the study. FDI, which appears to have a relatively stronger appeal to support economic growth in Ghana, must be focused on. Sound economic and political institutions will be needed to ensure that the economy benefits fully from inward remittances by directing them from consumption to savings avenues and investment opportunities.</p> Eric Fosu Oteng-Abayie Prosper Ayinbilla Awuni Thomas Kwame Adjeidjei Copyright (c) 2020-10-11 2020-10-11 8 3 49 65 Oil Price Shock, Fiscal Policy and Manufacturing Sector in Nigeria: Evidence from SVAR <p>In this study, we used SVAR framework to investigate the impact of oil shocks on manufacturing output in Nigeria via fiscal variables using annual data from 1981 to 2019 which is sourced from Central Bank of Nigeria (CBN). We found that government revenue is explained by oil price in both short- and long-run while expenditure explains revenue in the long-run, though very weak. This is an indication that spending by government can further generate more revenue in the long-run. We equally found that government expenditure is not explained by its revenue which could suggest that it is financed largely by other means like borrowing. In Addition, variations in price level is weakly explained by expenditure- indicating the import-generating nature of inflation in Nigeria. Lastly, manufacturing output is jointly explained by inflation, revenue and oil price. This means that expenditure lost its explanatory power to price level in the process. We recommend that efforts should be made to diversify the economy such that government expenditure would be financed by its generated revenue rather than borrowing or unnecessary depending on foreign aids. Also, the monetary authority should always be quick in controlling inflation so that meaningful and real impact of expenditure can be felt by the manufacturing sector which will translate to growth of the aggregate economy.</p> Yinka Sabuur Hammed Omosola Arawomo Copyright (c) 2020-10-11 2020-10-11 8 3 66 83 Institutional Quality Explains the Difference of Natural Gas Revenues to Contribute in the Economy: Empirical Evidence from Tanzania <p>This paper uses Tanzanian annual time series data for the period 2007-2016 in a Bayesian MCMC (Markov Chain Monte Carlo) to establish and compare the impact of natural gas revenues and institutional quality in the economy. We found that, the interaction effect between natural gas revenues and institutional quality as contributors to the economy was wide. This difference seems to be largely explained by institutional quality. This suggests that strengthening institutional quality structures in the country will reshape natural gas revenues, providing higher national economic growth. The results are robust due to combinations of prior distribution and likelihood function. These findings have important implications for Tanzania, while also suggesting developing countries with natural resources need to ensure they have implemented appropriate policy measures to improve institutional quality.&nbsp;</p> Mwoya Byaro Abel Kinyondo Copyright (c) 2020-10-11 2020-10-11 8 3 84 97 Does Maternal Social Capital Have a Health Payoff? Evidence from Jimma Zone, Ethiopia <p>The relationship between social capital and health has been the subject of research in developed countries. However, empirical evidence from developing countries is scarce. This study examines the association between different dimensions of social capital and maternal health in Jimma Zone of Ethiopia.&nbsp; We utilized a cross sectional data gathered from a random sample of 422 mothers in four districts of the zone. We utilized two-stage regression procedure. We have also controlled for other confounding factors and heterogeneity of the study areas. We find that an increase in an overall score of a mother’s social capital would increase her probability of enjoying better health condition by about 0.61. However, we found mixed effects of different sub-dimensions of social capital. Increases in scores of sub-dimensions of structural social capital like social cohesion and networks are associated with 0.39 and 0.19 decreases in probability of enjoying better health status. Nevertheless, increases in scores of dimensions of cognitive social capital like general trust, institutional trust and sense of security would increase probability of enjoying better health status by 81%, 64% and 65% respectively. Therefore, people with higher levels of social capital – especially in terms of social interaction and all forms of cognitive social capital– engage in healthier behaviors and feel healthier. Since the other forms of capital such as physical and human capital are scarce in countries like Ethiopia, health policies that aim to promote maternal health should promote favorable social capital, which is abundantly available in these countries.</p> Badassa Wolteji Chala Zewdie Birhanu Leta Sera Jemal Abafita Copyright (c) 2020-10-11 2020-10-11 8 3 98 115 Does Immigration Stimulate Non-Traditional Exports? Evidence from Zambia <p>This paper investigates the effect of immigration on trade flows using Zambia as a case study. Using panel data for the period 1990-2018, the relationship is formulated using a gravity model and estimated using the Poisson Pseudo Maximum Likelihood Estimation (PPML). The model estimated the influence of immigration on total trade, imports and non-traditional exports (NTEs), while controlling for whether or not the trade partner has a trade agreement with Zambia. &nbsp;The results show a positive association between immigration and total trade, imports and NTEs. It points to the importance of social networks in fostering trade flows across countries and that trade costs matter.</p> Maio Bulawayo Dale Mudenda Manenga Ndulo Charles Simwanza Copyright (c) 2020-10-11 2020-10-11 8 3 116 136 Household Socioeconomic Status and Health Care Demand for Childhood Fever and Diarrhea in Tanzania <p>This study uses 2015/16 Tanzania Demographic and Health Survey (TDHS) data to estimate determinants of treatment seeking for childhood illness and the choice of health provider by employing logistic and multinomial probit model, respectively. Our empirical results from Binary logistic regression results show that treatment seeking for childhood illness is significantly related with mother’s occupation, household wealth status, distance to the health facilities, child’s age and place of residence. On the other hand, multinomial probit model results show that the choice of health provider is significantly related with mother’s occupation and access to mass media, household health insurance, household wealth status, and distance to the health facilities. Our results from both logistic and multinomial probit estimations are robust to alternative models’ specifications. In terms of policy implication, this study strongly recommends promotion of health insurance as well as creation of awareness on maternal and reproductive health to mothers. Moreover, the government should enhance, strengthen and ensure that health facilities are constructed close to households’ domicile and that these health facilities are provided with adequate services.</p> Magashi Joseph Asela Miho Copyright (c) 2020-10-11 2020-10-11 8 3 137 157