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) ndanshau@udsm.ac.tz (Professor Michael O.A. Ndanshau (Associate Editor)) Sat, 11 Sep 2021 09:56:16 +0000 OJS 3.1.2.4 http://blogs.law.harvard.edu/tech/rss 60 Asymmetric Effects of Fiscal Deficit on Monetary Policy Transmission in Tanzania https://www.ajol.info/index.php/ajer/article/view/214225 <p>This study seeks to investigate the asymmetric effects of fiscal deficit on monetary policy transmission in Tanzania by using quarterly time series data for the period 2001: I to 2019: IV. In the analysis, which is based on the theory of sovereign risk premium, use is made of the asymmetric cointegration modelling in a non-linear autoregressive distributed lag model to distinguish the effects of fiscal deficit on interest rates, exchange rates and inflation. The findings indicate that interest rate and exchange rate react differently to negative and positive changes in fiscal deficit over the long run, and, inflation responds differently to such changes over the long run and short run period. The findings also revealed that interest rate is more sensitive to the worsening in fiscal deficit; and, accordingly fiscal consolidation is an essential requirement for effective transmission of the monetary policy. In particular, implementation of the price based policy framework in Tanzania should be considered carefully, as persistent rise in budget deficits would eventually counter the effectiveness of monetary policy by keeping market interest rates and inflation at high levels. The findings provide evidence in favour of a fiscal policy to stabilise monetary policy variables, but also highlights the importance of long-term fiscal sustainability for the attainment of monetary policy objectives.</p> Lusajo P. Mwankemwa, Michael O.A. Ndanshau Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214225 Fri, 10 Sep 2021 00:00:00 +0000 Globalization and Exchange Rate Pass Through: Evidence from Zambia https://www.ajol.info/index.php/ajer/article/view/214227 <p>This study examines the impact of globalisation on the exchange rate pass through in Zambia. We study the influence of Chinese imports, regional and multilateral globalization on exchange rate pass through to consumer prices in Zambia between 2006 and 2017. We employ a combination of the pricing to market model and vector error correction model (VECM) to achieve the objective. The results from the study show that Chinese presence and multilateral globalisation have a positive effect on the exchange rate pass through to consumer prices in both the short and long run. &nbsp;However, the effect of Chinese presence on the exchange rate pass through is greater than that of multilateral globalisation. This is both in the short and long run. On the other hand, regional globalization has a negative effect on the exchange rate pass through to consumer prices in both the short and long run. This could be because regional globalization may be characterized by cross border trade in local currencies in the region. This might have a diminishing effect on exchange rate pass through to prices in Zambia. This signals to policy makers that there could be need to pursue regional integration policies.</p> Humphrey Fandamu, Manenga Ndulo, Mercy Fandamu Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214227 Fri, 10 Sep 2021 00:00:00 +0000 Potato and Tomato Supply and Yield Responses to Policy in Ethiopia https://www.ajol.info/index.php/ajer/article/view/214228 <p>Improving the productivity and profitability of farming activity is considered the key pathway out of poverty for many rural households. Agricultural productivity can be achieved through improving technical progress and increasing irrigation practice utilization. The motivation of this study is to figure out the underlying reasons for the low inelastic potato and tomato supply responses in the short and long-run. The paper attempts to estimate the responsiveness of potato and tomato yield and supply to demand, irrigated area, technical progress and industrial policy in Ethiopia. The study uses the error correction model and VARs with the aid of time series data. The results indicate that tomato supply is found to be responsive to demand signal and industrial policy shock in the short run but not to price incentive in the short-run as predicted. Tomato yield is responsive to demand signal, price incentive and industrial policy shock in the short‐run. The numerical magnitude of error correction coefficient for potato yield is 0.88 indicating about 88% of disequilibrium is corrected in a year. The implied departure from equilibrium is about 12%. Interventions in increasing irrigated area and the technical progress in potato and tomato production impact yield and output significantly. The speeds of adjustment towards equilibrium for tomato yield and output are quite fast, it points towards the highest response to technical progress. The results give emphasis to the need to strengthen technical progress and irrigation water supply through effective policies.</p> Zewdie Habte Shikur Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214228 Fri, 10 Sep 2021 00:00:00 +0000 Provider Process Quality of Healthcare and its Determinants in Kenya https://www.ajol.info/index.php/ajer/article/view/214281 <p>This study seeks to examine the factors that influence provider process quality of healthcare for childhood illnesses in Kenya as indicated by accuracy in illness diagnosis. To do this, the study first employed an ordered logit model on the 2018 Kenya Health Service Delivery Indicators survey data, but then finally opted for the generalized ordered logit model after the Brant test invalidated the proportional odds assumption. The analysis was based on basic microeconomic theory-the principal-agent model. The regression results reveal that health workers with higher level of education, in higher cadres and who had been trained on Integrated Management of Childhood Illnesses were more likely to provide high quality healthcare when presented with childhood illnesses symptoms. Also, being male causes a positive coefficient of the ability to provide quality healthcare. Health facility characteristics, mainly higher facility tier, government ownership and urban location were significant particularly for provision of high-quality healthcare. The results call for implementation of strategies that seek to enhance lower cadre health worker’s child care management, infrastructural development across the country and even distribution of healthcare workers.</p> Isabella Kiplagat, Mercy Mugo, Martine O. Oleche Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214281 Fri, 10 Sep 2021 00:00:00 +0000 Fiscal Policy and Crime Rate in Nigeria https://www.ajol.info/index.php/ajer/article/view/214282 <p>The need to reduce the level of criminal activity has preoccupied the attention of policymakers which has led to the exploration of feasible, alternative routes to achieve United Nations’ Sustainable Development Goal -16. This phenomenon has been the present practice of most developing countries such as Nigeria that is inundated with higher level of crime rate. This study examines the possibility of using fiscal policy tools for crime control by employing Dynamic Ordinary Least Square (DOLS) technique on Nigerian data over a period of 1986-2019. It also examines the causal links between the variables via the Toda-Yamamoto Granger causality. The following findings emerged: (1) Expansionary fiscal policy reduces crime behaviour in Nigeria. This result is robust when public spending is used as a proxy for fiscal policy. (2) There is a one-way causality moving from crime rate to fiscal deficit. (3) There is a one way causality moving from urbanization to crime rate. (4) We find a two-way causality between inflation and fiscal deficit. In terms of policy implications, these findings suggest that fiscal policy can be used to curb crime behaviour in the developing countries.</p> Folorunsho M. Ajide Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214282 Fri, 10 Sep 2021 00:00:00 +0000 Institutional quality and economic growth: evidence from Sub-Saharan Africa countries https://www.ajol.info/index.php/ajer/article/view/214283 <p>This paper employs two step systems GMM to analyse the effect of institutional quality on economic growth for Sub-Saharan African countries for the period from 2006 to 2018. The findings show that an improvement on institutional quality positively and significantly improve Sub-Saharan African countries output. The findings further provide evidence that the effect of institutional quality on output varies with regional location of SSA countries. In particular, institutional qualities are more effective in driving income growth in West African region than the other three regions of Eastern Africa and Central Africa. In addition, the findings indicate that the impact of institutional quality on output growth varies with income level of SSA countries. An improvement in intuitional quality is more likely to improve economic performance of low income SSA economies than the middle income SSA countries. SSA countries should strengthen independent institutional bodies that prosecute economic crimes. Also, African countries should support African agendas that are aligning with global development agenda. Sub-Saharan African countries should strengthen institutions that widen democratic space, civil liberty and the participation of citizen in the development agenda of a country</p> Dickson O.Wandeda, Wafula Masai, Samuel M. Nyandemo Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214283 Fri, 10 Sep 2021 00:00:00 +0000 Does Public Expenditure Financing Mode Matter for Economic Growth in Tanzania? A Co-integration and Error Correction Modeling Approach https://www.ajol.info/index.php/ajer/article/view/214284 <p>This study examines whether public expenditure financing mode matters for economic growth in Tanzania. The study employed co-integration and error correction modeling approach to explore the short-run and long-run effects of various methods of financing public expenditure on economic growth. The study confirmed that the growth effects of public expenditure depends on its financing mode. The results show that public expenditure financed through tax revenue and non-tax revenue enhance growth. Though tax revenue financed expenditure has a marginal growth effect suggesting existence of high tax rates in Tanzania. Also, the results show that while public expenditure financed through external borrowing bolster growth, government spending based on internal borrowing and grants dampens economic growth. This outcome suggests that grants are tied with conditions that have adverse economic effects to recipient country and that government domestic borrowing crowds out private sector investment. In order to promote growth, government has to increase domestic resource mobilization by widening tax base, controlling tax revenue leakages and tapping more non-tax revenues. Moreover, in case of budget deficit, government revenues should be supplemented by commercial external borrowing rather than internal borrowing and grants.</p> Mussa Ally Mwamkonko Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214284 Fri, 10 Sep 2021 00:00:00 +0000 Growth Effects of Foreign Direct Investments in Zimbabwe: Do Sources Matter? https://www.ajol.info/index.php/ajer/article/view/214285 <p>The study investigated foreign direct investment (FDI) growth effects in Zimbabwe using data spanning 1990-2019. FDI-led growth theories often view FDI as an enabler of economic growth. However, the extent may depend upon the source of FDI. Nonetheless, existing studies on Zimbabwe base their conclusions on aggregate FDI. Accordingly, we provide fresh evidence by disaggregating FDI inflows by sources. This is logical given the reality that FDI from different sources is heterogeneous. We used the Autoregressive-Distributed-Lag (ARDL) technique to estimate a time series model derived from neoclassical and endogenous growth models. Results indicated that FDI has a significantly positive growth effect. More importantly, we document that FDI sources do matter greatly. Specifically, FDI flows from Africa and Asia were found to have positive and significant growth effects. However, FDI from Europe and the United States has negative and insignificant impacts. We proffer two recommendations. Zimbabwe should attract more FDI from economies/regions in the vicinity of its level of development. Accordingly, Zimbabwe should rationally embrace the recently launched AfCFTA. It is vital to strike a balance between market deepening and promoting domestic production. Also, while most FDI from Asia is from is China, we urge Zimbabwe to provide a conducive environment to investors from the rest of Asia. This can be achieved through signing bilateral FDI agreements with Asian countries.&nbsp;&nbsp;</p> Chinyanganya Kudakwashe. L, Sunge Regret Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214285 Fri, 10 Sep 2021 00:00:00 +0000 The uncertainty of natural gas consumption in Tanzania to support economic development. Evidence from Bayesian estimates https://www.ajol.info/index.php/ajer/article/view/214286 <p>Using a Bayesian regression model, this study evaluates the impact of natural gas use on economic growth in Tanzania from 2004 to 2016. Natural gas consumption, economic growth (as assessed by real GDP per capita), and labor supply and capital were all controlled as factors in the model. The empirical findings of this study reveal that natural gas usage during the study period is highly uncertain in terms of economic contribution. The mean value of natural gas consumption in 95 percent credible intervals ranges from negative to positive. This means that natural gas consumption and market demand are unlikely to have a significant impact on the country's economic progress. The findings, on the other hand, demonstrated that the labor force supply has a favorable impact on economic growth. To affect economic development, we advocate providing additional labor force to the Tanzanian economy, as well as upgrading and strengthening natural gas consumption policies, such as gas power production, industrial use and an efficient natural gas market.</p> Mwoya Byaro, Derick Msafiri Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214286 Fri, 10 Sep 2021 00:00:00 +0000 The impact of exchange rate volatility on foreign direct investment inflows in Ghana. https://www.ajol.info/index.php/ajer/article/view/214287 <p>This paper analyzed the effect of exchange rate volatility and its interaction on the foreign direct investment inflow into Ghana. The unit root of the series was checked using Augmented Dickey-Fuller (ADF), Phillps-Parron (PP) and Kwaiatkpwski-Phillps-Schmidt-Shin (KPSS) tests. According to the results of the unit root tests all the variables were stationary at 5 percent level of significance in their first difference. Therefore, the Dynamic Ordinary Least Square regression model was used for the analysis. It was found that the depreciation of the real exchange rate, the degree of openness of the economy and interaction term do not encourage the inflows of foreign direct investment. However, size of economy and volatility do attract foreign direct investment inflows. Based on the above findings the following recommendations are made. Since volatility of the real exchange rate attracts FDI inflows, the Government should encourage import substitute FDIs to help Ghana industrialized.</p> HAVI, Emmanuel Dodzi Kutor Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214287 Fri, 10 Sep 2021 00:00:00 +0000 Determinants of Intimate Partner Violence in Tanzania: Evidence from the National Demographic and Health Survey https://www.ajol.info/index.php/ajer/article/view/214943 <p>The prevalence of intimate partner violence (IPV) against ever married women in Tanzania remains high. This has an implication on development at both micro and macro level given the resulting socio-economic costs relating to IPV. It is for this reason that the present study intended to examine determinants of IPV among married women in Tanzania. Determinants are estimated by analysing the 2015/16 Tanzania Demographic and Health Survey (TDHS) data using logistic regression. Results show that risk factors which are positively associating with IPV include male partner alcohol abuse, history of domestic violence in childhood, years in marriage, polygamy marriage and household size. Meanwhile, deterrent factors comprise of the age of married women and male partner’s education. Furthermore, results indicate varied determinants of different forms of IPV across different zone in Tanzania. It is against this backdrop that we recommend for policies that ensure both women and men have equal access to quality education; amendments of relevant laws as well as raising IPV awareness using zone-specific determinants to discourage cultural norms that condone IPV.</p> Abel Kinyondo, Magashi Joseph Ntegwa, Asela Miho Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214943 Fri, 24 Sep 2021 00:00:00 +0000 Savings-Growth Nexus Revisited: An Empirical Analysis from Nigeria https://www.ajol.info/index.php/ajer/article/view/214960 <p>This study re-visits the ongoing debate on the savings-growth nexus in developing countries, taking into account the significance of the unique characteristics of the pre- and post-democratic dispensations in Nigeria as a case study. A multivariate VECM Causality test for pre- and post-democracy samples were carried out using data covering the period of 19 years (1981 to 1999) for pre- democracy and 20 years (2000 to 2019) for post-democracy era. In the short run, we discovered that there was no significant causal relationship between savings and growth during the pre-democracy period but there exists a unidirectional causality running from savings to growth in the post-democracy period. However, we found a bidirectional causal relationship between savings and growth in the long run for both pre-and post-democracy periods. Therefore, this study concluded that savings causes economic growth in post democracy period in line with Mill–Marshall–Solow school of thought (short-run period) while both savings and growth reinforce each other in the long-run for both periods. Thus, we recommend that Nigerian policy-makers and government should embark on monetary policies that would increase deposit rates to encourage more savings so as to mobilize funds from surplus-side to the deficit-side of the economy for productive investments and at the same time come up with a regulation that would reduce off-balance sheet activities of most financial institutions in the country.</p> Abiodun S. Olayiwola, Solomon O. Okunade, Musbau O. Fatai Copyright (c) https://www.ajol.info/index.php/ajer/article/view/214960 Fri, 24 Sep 2021 00:00:00 +0000 Potential of Fragmented Landholding on Crop Diversification and Credit Worthiness to Smallholder Farmers in Tanzania https://www.ajol.info/index.php/ajer/article/view/215158 <p>In most developing economies, agriculture sector is dominated by smallholder farmers who are faced with unstable crop output and income due to dependency on unpredictable weather and market conditions. Most farms in Tanzania are in fragmented landholdings which do not adequately provide appetite to financial institutions’ financial support. Smallholder farming is perceived by most financial institutions in Tanzania as a risky business and hence receives inadequate financial support. This situation hampers the efficiency and sustainability of farming as business by smallholder farmers. The potential of fragmented landholdings on crop diversification and credit worthiness to smallholder farmers have not been explored in Tanzania. The current paper presents findings on the potential of crop diversification in promoting smallholder farmers’ credit worthiness.&nbsp; &nbsp;Key findings are that, fragmented land holdings offer avenue for crop diversification which reduces variability of farm output and income given the changing climate and crop market dynamics. The policy implication is that, smallholder farming in fragmented landholdings is potentially credit worthwhile borrower. For effective support to smallholder farmers, financiers should consider crop diversification and yield status when assessing farmers’ credit worthiness as alternative to collaterals and hence lowering interest rate charged to borrowing farmers with reduced credit default risks.</p> Aloyce Hepelwa Copyright (c) https://www.ajol.info/index.php/ajer/article/view/215158 Tue, 28 Sep 2021 00:00:00 +0000 What drives Indian Non-SOE FDI into Africa? https://www.ajol.info/index.php/ajer/article/view/215173 <p>This paper puts FDI received by Africa from Indian enterprises that are not owned by State owned enterprises (non-SOE) under the empirical lens, placing it within a broader mandate of increasing Indo-African relations beyond trade. The use of international business literature for a qualitative regression analysis using panel data for 2008-18 shines a light on the host country factors that drive FDI to Africa. These include country alliances, GDP and net overseas development assistance of host African countries. This analysis contributes to the sparse literature on African FDI inflows from developing countries like India. It also pioneers the distinction between Indian SOEs and non-SOEs in an empirical analysis.</p> Ankur Bhatnagar Copyright (c) https://www.ajol.info/index.php/ajer/article/view/215173 Tue, 28 Sep 2021 00:00:00 +0000 Impact of Real Effective Exchange Rates on Balance of Payments: Empirical Evidence from Nigeria https://www.ajol.info/index.php/ajer/article/view/215196 <p>This paper examined the impact of the real effective exchange rate variations on the overall balance of payments in Nigeria between 1986-2019. The autoregressive distributed lag (ARDL) bounds co-integration technique was used to analyse the data based on the outcome of the stationarity test. The bounds test indicated &nbsp;a long-run relationship among the macroeconomic variables in the balance of payments function. Empirical evidences indicated that real exchange rate had insignificant negative effect on the balance of payments in the long-run, but exerted significant positive effect in the short-run with a lag. Private sector credit impacted negatively in the long-run, while real output significantly improved balance of payments both in the long-run and in the short-run with a lag. Lagged real interest rate and oil prices had significant positive short-run impacts, while the latter impacted negatively in the long-run. Overall, the result implied that real exchange rate depreciation may not be used to improve Nigeria’s balance of payments position. The study, therefore, recommended that the monetary authority should &nbsp;adopt &nbsp;proactive export promotion policies that will strengthen and stabilise the real exchange rate of the naira. It is also important to &nbsp;ensure &nbsp;productive utilization of the private sector credits, and diversify the country away from the oil sector in view of the current global dwindling oil prices.</p> Aniekan O. Akpansung Copyright (c) https://www.ajol.info/index.php/ajer/article/view/215196 Tue, 28 Sep 2021 00:00:00 +0000 The potential Trade effects of Democratic Republic of Congo Joining the East African Community bloc https://www.ajol.info/index.php/ajer/article/view/215321 <p>DRC has expressed interest in joining the EAC regional bloc to tap into the benefits of the regional trade and expanded markets. Using trend analysis of trade flows and SMART-WITS Partial Equilibrium model, this study examines the likely impact of DRC’s membership in the EAC, to establish trade effects of liberalising trade between EAC and DRC. The emerging results reveal that trade effects are positive among the EAC partner states, more so for Rwanda and Uganda given that there are the leading EAC exporters to DRC. The analysis also identifies the EAC main economic sectors poised to benefit a result of this trade liberalisation. At a sectoral level, the largest trade effects will be experienced in agro-processing, metal products and mineral ores industries. These findings point to the need for EAC members to pursue develop these sectors while pursuing industrialization agenda to replace DRC’s imports from the rest of the world.</p> Regean Mugume, Kibirige Aida Nattabi Copyright (c) https://www.ajol.info/index.php/ajer/article/view/215321 Thu, 30 Sep 2021 00:00:00 +0000