African Journal of Economic Review https://www.ajol.info/index.php/ajer <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="http://www.out.ac.tz/" href="http://www.out.ac.tz/" target="_blank" rel="noopener">http://www.out.ac.tz/</a></p> <p>This journal has recently been accepted to be indexed&nbsp;in REPEC <a title="https://ideas.repec.org/" href="https://ideas.repec.org/" target="_blank" rel="noopener">https://ideas.repec.org/</a></p> en-US 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 Kazungukmn@yahoo.com (Dr. Khatibu Kazungu) dues.ngaruko@out.ac.tz (Dr. Deus Ngaruko) Sat, 04 Jul 2020 12:05:15 +0000 OJS 3.1.2.4 http://blogs.law.harvard.edu/tech/rss 60 Interest Rate and its Threshold Effect on Private Investment: Evidence from Ghana https://www.ajol.info/index.php/ajer/article/view/197200 <p>This paper investigates the effect of interest rate on private investment and determine the threshold level beyond which interest rate becomes detrimental to private investment in Ghana. The paper employed annual time series data from 1986-2016. To investigate the effect of interest rate on private investment, the paper employed the autoregressive distributed lag (ARDL) model, while the quadratic function and conditional least square procedures were employed to estimate the interest rate threshold. Results from the ARDL model revealed positive long and short run effect of interest rate on private investment, thus confirming the McKinnon-Shaw hypothesis in Ghana. However, results from the quadratic function and conditional least square model found the threshold of 23.59% and 24% respectively, beyond which interest rate impacts negatively on private investment in Ghana. Thus, the paper recommends the deepening of the financial sector reforms, improving competition in the financial sector as well as maintaining macroeconomic stability.</p> Solomon Luther Afful, Kofi Kamasa Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197200 Sun, 05 Jul 2020 00:00:00 +0000 Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions https://www.ajol.info/index.php/ajer/article/view/197201 <p>This paper analyzes the effect of different types of foreign aid on tax revenues in West African Economic and Monetary Union (WAEMU) countries. A fixed-effects panel model with instrumental variables was developed over the period spanning from 1985 to 2016. The results indicate that multilateral aid affects positively and significantly tax revenues while bilateral aid does not. Moreover, the analysis of the decomposed effect of aid revealed that concessional aid and technical assistance enhance fiscal resources mobilization. However, grants reduce tax effort. The results also show that when aid is aggregated, its effect on tax revenues is ambiguous. These results justify for many reasons the reorientation of foreign aid towards investment for effective tax systems in WAEMU countries in compliance with Addis Ababa Action Agenda 2015 of the third international conference on Financing for Development. Strengthening multilateral partnership is advocated in accordance with the 17th Sustainable Development Goals. Also, an improvement of institutional quality could make foreign aid more efficient for tax collection in the study areas.</p> Nimonka Bayale Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197201 Sun, 05 Jul 2020 00:00:00 +0000 Money and Output in Tanzania: A Test for Causality https://www.ajol.info/index.php/ajer/article/view/197202 <p>This study has investigated empirically the causal relationship between money and output in Tanzania for the period 1986 to 2018. A VECM was estimated in log-difference and in log-level and Granger causality test undertaken by using annual time series data to test a null hypothesis that money does not Granger cause output either way. The log-difference results rejected the null that money Granger cause output in favour of the alternative hypothesis that output Granger cause money and the effect was unidirectional. The results in this case suggest money supply is endogenous such that monetary policy cannot directly be used in stabilizing the economy over the short-run. Instead the government should rely on fiscal policy rather than monetary policy to attain macroeconomic objectives in general and price stability in particular. Robustness test results from estimation the log-level results suggested the causality was unidirectional from money to output, implying money is exogenously determined and could be controlled by the monetary authority to achieve macroeconomic objectives, price stability in particular. The differing results demand for further empirical tests.</p> Mnaku H. Maganya, Michael O. A. Ndanshau Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197202 Sun, 05 Jul 2020 00:00:00 +0000 Determinants of Economic Growth in ECOWAS Countries: An Empirical Investigation https://www.ajol.info/index.php/ajer/article/view/197203 <p>The Economic Community of West Africa States (ECOWAS) is a regional group consisting of 15 countries which was founded 1975 with the goal to promote economic trade, national cooperation, and the creation of a monetary union throughout West Africa. This paper empirically assesses the determinants of the economic development from 1996-2016 in ECOWAS using panel unit root tests, panel cointegration tests, and the estimation of the dynamic panel data regression via the Arellano–Bond estimator and Arellano–Bover and Blundell–Bond estimator. &nbsp;The empirical results show total factor productivity (TFP), law, and somewhat corruption are indicative of economic growth under the Arellano–Bond estimator.&nbsp; Under the Arellano–Bover and Blundell–Bond estimator, the results revealed that inflation, gross domestic saving (GDS), and TFP have a significant impact on economic growth in the ECOWAS. &nbsp;From these empirical results, improving economic growth in ECOWAS countries improves the quality of life of people and the government of each ECOWAS country become cognizant of the benefits in the implementation of pro-growth policies. &nbsp;The policy implication is that the governments of the ECOWAS countries should give policy priority to promote pro-growth economic policies and enhance institutions to enable economic growth.&nbsp;&nbsp;</p> Brian W. Sloboda Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197203 Sun, 05 Jul 2020 00:00:00 +0000 Intimate Partner Violence and Labour Market Outcomes in Tanzania https://www.ajol.info/index.php/ajer/article/view/197204 <p>This paper takes data from the Tanzania National Panel Survey (TNPS) (2008-2009), fits them to the probit model to examine factors driving the probability of women to experience IPV (Intimate Partner Violence) and uses the propensity score matching to estimate the effect of IPV on women’s probability of employment and earnings. The results show that the levels of IPV in Tanzania are still alarmingly high, relative to the levels in the developed countries. It is found that IPV is exacerbated by some male characteristics, including alcohol abuse, young age, polygamy, cohabitation, among others, with violence being higher in the rural areas than in the urban areas. In addition, low property ownership for women is found to contribute to the problem. A majority of women accept to live by the oppressing traditional norms, which they are using to justify IPV. The study finds IPV to be a catalyst to self-employment for women, which may enhance their bargaining. However, the negative side is that the business incomes from such self-employment ventures are likely to be depressed. In view of these findings, we still need to continue the fight against IPV.</p> Martin J. Chegere Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197204 Sun, 05 Jul 2020 00:00:00 +0000 Does Participatory Forest Management Encourage Tree Planting? An Example from Tanzania https://www.ajol.info/index.php/ajer/article/view/197205 <p class="doublespacetree" style="margin-top: 0in;"><span lang="EN-GB">The effectiveness of efforts to protect forests in lower-income countries from excessive degradation, such as through the introduction of participatory forest management, depends in part on how nearby rural populations respond to these efforts. In this paper we focus on tree planting on private land – an important yet understudied response. Combining a conceptual spatial landscape model with primary data, we demonstrate that villagers do plant trees in response to increased forest protection, but only when there are no unprotected forests within their landscape to which they can displace their extraction activities. Our research highlights how tricky it is methodologically to isolate this response in Tanzania, because both tree planting and the siting of forests under increased protection following the introduction of participatory forest management are responses to forest degradation. </span></p> Razack Lokina Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197205 Sun, 05 Jul 2020 00:00:00 +0000 Environmental Quality, Economic Growth, and Health Expenditure: Empirical Evidence from a Panel of African Countries https://www.ajol.info/index.php/ajer/article/view/197206 <p>This study investigates the relationship among environmental quality, economic growth and health expenditure in 47 African countries using both static (pooled OLS and fixed/random effect) and dynamic (system GMM) estimation methods. Data covering the period 2000 to 2018 are employed and three proxies (carbon dioxide, nitrous oxide and methane emission) are used to capture the effect of environmental quality. The findings of the study indicate evidence of a positive and significant effect of economic growth on health expenditure, while also revealing a positively significant relationship between poor environmental quality and health expenditure. The empirical findings of this study suggest that of the three proxies of environmental quality carbon dioxide emission had the highest effect on healthcare expenditure while economic growth significantly increased health expenditure across the five African regions (North Africa, East Africa, Central Africa, West Africa and Southern Africa). The study concludes that health is a necessity good and a deterioration of the environmental quality increases health expenditure. Hence, there is a need to uphold the SDG clean energy policies that target the reduction of environmental pollution while striving for an inclusive and sustainable economic growth</p> Cleopatra Oluseye Ibukun, Tolulope Temilola Osinubi Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197206 Sun, 05 Jul 2020 00:00:00 +0000 Environmental Quality, Economic Growth, and Health Expenditure: Empirical Evidence from a Panel of African Countries https://www.ajol.info/index.php/ajer/article/view/197207 <p>This study investigates the relationship among environmental quality, economic growth and health expenditure in 47 African countries using both static (pooled OLS and fixed/random effect) and dynamic (system GMM) estimation methods. Data covering the period 2000 to 2018 are employed and three proxies (carbon dioxide, nitrous oxide and methane emission) are used to capture the effect of environmental quality. The findings of the study indicate evidence of a positive and significant effect of economic growth on health expenditure, while also revealing a positively significant relationship between poor environmental quality and health expenditure. The empirical findings of this study suggest that of the three proxies of environmental quality carbon dioxide emission had the highest effect on healthcare expenditure while economic growth significantly increased health expenditure across the five African regions (North Africa, East Africa, Central Africa, West Africa and Southern Africa). The study concludes that health is a necessity good and a deterioration of the environmental quality increases health expenditure. Hence, there is a need to uphold the SDG clean energy policies that target the reduction of environmental pollution while striving for an inclusive and sustainable economic growth.</p> Cleopatra Oluseye Ibukun, Tolulope Temilola Osinubi Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197207 Sun, 05 Jul 2020 00:00:00 +0000 Inclusive Growth in Tourism-led Growth Hypothesis: Evidence from Nigeria https://www.ajol.info/index.php/ajer/article/view/197208 <p>This study investigates the direction of causality between tourism and inclusive growth in Nigeria using quarterly data between 1995Q1 and 2018Q4. The study uses four indicators of tourism; tourist arrivals, tourism receipts and expenditures, and a tourism activity index, generated with the Principal Component Analysis, from the first three indicators. The study employs the Toda-Yamamoto granger causality test. The results validate the tourism-led inclusive growth hypothesis using tourist arrivals and tourism activity index, while the neutrality hypothesis of no causality is accepted for inclusive growth and each of tourism receipts and expenditures. The findings have implications for policymakers in Nigeria. These include promoting tourism, by means of appropriate measures, in the economy in order to create jobs and reduce income inequality and poverty; putting in place measures to reduce corruption to avoid mismanagement of tourist receipts; and making sure that there is a necessary due process towards tourism expenditures.</p> Tolulope Temilola Osinubi, Olufemi Bankole Osinubi Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197208 Sun, 05 Jul 2020 00:00:00 +0000 Modelling Household Electricity Consumption and Living Standard in Nigeria https://www.ajol.info/index.php/ajer/article/view/197209 <p>Poor standard of living has remained a source of concern in Nigeria despite enormous resources available to the nation. Concerted efforts have been made through intensive power sector reforms and huge budgetary allocations to the sector, yet the performance of the power sector towards improving the standard of living of the Nigerian households has remained a source of doubt. This study investigated the impact of household electricity consumption on the standard of living in Nigeria over the period 1981 – 2018. The study employed the ARDL bound cointegration test to determine the existence of a longrun relation between the standard of living and the chosen explanatory variables, while the Pairwise Granger was used to establish the direction of causality between the household electricity consumption and standard of living. The results show that household electricity consumption is a significant contributor to an improved standard of living in Nigeria and that a feedback causality flows between the household electricity consumption and standard of living in Nigeria. Based on these findings, the study recommends among other things that the government should improve the level of electricity supply especially for the residential consumption by investing more on infrastructural development via the installation of more transformers that will facilitate electricity distribution across the country.</p> Anne C. Maduka, Chekwube V. Madichie, Ikechukwu H. Ajufo Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197209 Sun, 05 Jul 2020 00:00:00 +0000 Exchange Rate Volatility and Domestic Investment: Evidence from Twelve ECOWAS Countries https://www.ajol.info/index.php/ajer/article/view/197210 <p>This paper examines the dynamic relationship between exchange rate volatility and domestic investment for twelve ECOWAS countries over the period 1986-2017. We employed the ARDL bound testing approach for co-integration and error correction modeling techniques by incorporating real GDP, real interest rate, real exchange rate, and exchange rate volatility as essential drivers of domestic investment. The results of the ARDL Bound test confirm the existence of long-run relationship among the variables in the selected countries. Furthermore, the findings show that exchange rate volatility is negative and statistically significant only in the case of Nigeria, Sierra Leone, Guinea, Gambia, Cote d’lvoire, Togo, and Liberia but insignificant in Cabo Verde, and Senegal. However, contrary to many theoretical predictions and hypotheses, exchange rate volatility is found to be positive but insignificant in Ghana, Benin, and Burkina Faso.</p> Anthony E. Akinlo, Olufemi G. Onatunji Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197210 Sun, 05 Jul 2020 00:00:00 +0000 The Assessment of South-South Trade Potentialities: The Case of Turkey and ECOWAS Countries. https://www.ajol.info/index.php/ajer/article/view/197211 <p>This paper presents an economic analysis of the intensity and the trade potential between Turkey and the ECOWAS countries. Using the trade intensity, the trade complementarity and the revealed comparative advantage indexes, the results indicate that Ghana, Burkina Faso, and Togo have high export proportions towards Turkey while Benin, the Gambia, Ghana, Guinea, Senegal, and Togo are increasingly using Turkey as a source of imports. Ghana appears to be the country with the most integrated trade relationship with Turkey compared to other countries in the region. Turkey has a comparative advantage over most of the ECOWAS countries in foodstuffs, textiles, metals, miscellaneous, and plastic and rubber. The trade complementarity index shows that a trade agreement would be ideal between Turkey, Ghana, and Guinea but such an agreement would not be viable for Liberia and Mali, while the results are less conclusive for the remaining of countries. In light of these results, we emphasize that trade potentials exist between Turkey and ECOWAS, notably in the processed food sector, textile, and cotton processing plants, and for an effective trade agreement implementation, individual characteristics of each ECOWAS country need to be taken into account.</p> Patrick Chabi, Fatih Saygili Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197211 Sun, 05 Jul 2020 00:00:00 +0000 The Relationship between Economic Growth and Service Sector in Tanzania: An Empirical Investigation https://www.ajol.info/index.php/ajer/article/view/197212 <p>The study uses Autoregressive Distributed Lag Model (ARDL) to examine the relationship between economic growth and service sector in Tanzania for the period 1970 to 2015. Further, bounds test of cointegration is used to test for existence of long-run relationship among the variables. Results show that the real economic growth is positively related to the growth rate of the services sector, and the latter’s effect is statistically significant in the long-run as postulated in theory. The error correction term has the envisaged negative sign and is statistically significant, implying convergence towards the long-run equilibrium. The results also show there is a bi-directional causality between GDP growth and growth of services sector. However, the growth in services sector has no effect on the economic growth in the short-run. This calls for friendly cum enabling business environment for investment and business operations in trade, tourism, financial sector, etc. in order to enhance value addition in the services industry.&nbsp; Promotion of technological innovations in the services sector is very crucial so as to improve efficiency, quality and productivity in delivery of services and thus enhance competition. The services sector should be considered as equally important as industrial sector due to cross-fertilization between the two.</p> Edwin Magoti, John M. Mtui Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197212 Sun, 05 Jul 2020 00:00:00 +0000 Socioeconomic Impact of Tourism: The Case of Tanzania https://www.ajol.info/index.php/ajer/article/view/197213 <p>The paper shows that while tourism has grown over the past few decades and has made a significant contribution to Tanzania’s exports, Tanzania’s economy and Tanzania’s labour market, Tanzania’s tourism sector could have been more successful. This claim is supported by the fact that Tanzania has a greater number of natural wonders than its competitors, greater potential market and it features more prominently than other destinations in the packages offered by tour operators around the world. The paper further argues that while the tourism sector could be more successful and attract more tourists, there is a trade-off between the economic dividends and the environmental problems that a thriving tourism sector could generate. The key policy implication of the present paper is that Tanzania’s tourism sector should be developed in a sustainable way. By failing to do so and by damaging the environment, the tourism sector could undermine its own sustainability.</p> Abel Kinyondo, Riccardo Pelizzo Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197213 Sun, 05 Jul 2020 00:00:00 +0000 Export-Led Growth Hypothesis in ECOWAS: A Panel Data Analysis https://www.ajol.info/index.php/ajer/article/view/197214 <p>The export led-growth hypothesis is one of the widely researched areas in the field of international economics. However, there is an ongoing debate as to whether it is export that causes economic growth or vice versa; with past and current research showing mixed findings. This paper retested the export-led growth hypothesis using panel data for ten selected ECOWAS member countries from 2000 to 2017. We used panel autoregressive distributed lags/pooled mean group (ARDL/PMG) approach as well as the panel causality test to determine the directional relationships of the macroeconomic variables used. We further disaggregated export into three (merchandise export, services export and total export) and controlled for other growth-relevant variables. From the panel ARDL/PMG estimation, we found that merchandise export positively influences economic growth in both the short and long runs; while services export and total export positively impact economic growth only in the long run. Using the pairwise granger causality test, we found a long run causal relationship flowing from services and total exports to economic growth respectively. However, we also found a bidirectional relationship between merchandise export and economic growth. Given the findings, this study found support for the export-led growth hypothesis in ECOWAS. Policy wise, efforts to improve the region’s economy should be channeled through export promotion strategies.</p> Genesis B. Kollie Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197214 Sun, 05 Jul 2020 00:00:00 +0000 Tax administration, Taxpayer’s Reciprocity and Compliance in Tanzania: Empirical Evidence from a Survey https://www.ajol.info/index.php/ajer/article/view/197215 <p>This paper analysed the effects of tax administration on taxpayer reciprocity and compliance. Four aspects: trust in the tax administration, corruption in tax administration, awareness and certainty of taxes to be paid, and ability of the tax administration to detect tax evaders were assessed. We obtained strong support that these variables significantly influence reciprocity and compliance. The tax administration in Tanzania therefore needs to improve on these aspects in efforts to boost voluntary tax compliance. Also, in the same vein of making people more compliant there is a need to improve on provision of tax education. Likewise, the enhancement in utilisation of ICT in tax administration processes.</p> Ryoba Mzalendo, Cyril Chimilila Copyright (c) https://www.ajol.info/index.php/ajer/article/view/197215 Sun, 05 Jul 2020 00:00:00 +0000