Effects of MI on Economic Growth in SSA: The issue of transmission channels and resilience to shocks Issiaka COULIBALY (PhD) David Bicchetti Assistant (FSEG Mali) Economist UNCTAD International Conference UEMOA/FERDI 13 December 2016
Conference Plan UEMOA/FERDI Issiaka COULIBALY Introduction Motivation Introduction Contribution Literature review : identification of channels Literature review : identification of channels Empirical methodology Descriptive analysis Empirical methodology Growth model Econometric approach Results and interpretation Growth dynamics Growth dynamics Literature and Model Estimation results Conclusion Conclusion Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 2 / 16
Introduction Motivation Conference The Monetary Union in Africa : A long time story UEMOA/FERDI Issiaka COULIBALY ◮ Independence and Monetary balkanization (Obstacle to trade Introduction and economic integration by OAU ). Motivation Contribution ◮ Monetary integration for strengthening economic Literature review : identification of integration (trade, financial, ...) channels Empirical ◮ MI projects supported by African and international methodology institutions ( AEC , RECs ). Descriptive analysis Growth model Econometric approach ◮ However, it raises several questions Results and interpretation Growth dynamics ◮ Does this trend suitable for African countries ? Literature and Model Growth ? Countries’ resilience to shocks ? Estimation results ◮ What kind of monetary integration (MI) ? Conclusion EURO ? / CFA ? / RMA ? ◮ What is the implications of the recent crisis within the Euro area ? ( MI ⇒ stability ? ) Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 3 / 16
Introduction Motivation Conference But ... several Questions UEMOA/FERDI Issiaka COULIBALY Introduction Motivation Contradictory and mitigated results from empirical literature. Contribution Literature review : ◮ Positive : Devarajan and De Melo (1987, 1991). identification of channels ◮ Mixed : Elbadawi and Madj (1996). Empirical methodology ◮ Not significant : Patillo et al. (2008) and Guillaumont (2013). Descriptive analysis Growth model ◮ Negative : Ghura and Hadjimichael (1996). Econometric approach Results and interpretation ⇒ Discrepancy between the theoretical benefits of MI and em- Growth dynamics Literature and Model pirical evidences . Estimation results ⇒ Shortcoming : the estimated effect is an average effect, do Conclusion not take into account the transmission channels Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 4 / 16
Introduction Contribution Conference Contribution UEMOA/FERDI Issiaka COULIBALY Introduction Motivation Contribution ◮ Explaining discrepancy between the theory and empi- Literature review : identification of rical evidence . channels ◮ Evolution of exchange rate (ER) regimes in counterfac- Empirical methodology tual group . Descriptive analysis ◮ Analyzing the potential transmission channels . Growth model Econometric approach ◮ Studying the resilience to shocks : Results and interpretation Growth dynamics ◮ Terms Of Trade (TOT) shocks (External). Literature and Model ◮ Political (Conflicts) and Natural shocks (Internal). Estimation results Conclusion Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 5 / 16
Literature review : identification of channels Conference Potential transmission channels UEMOA/FERDI Issiaka COULIBALY Introduction Monetary Motivation Union Contribution Literature review : identification of Macro Stability Openness channels Empirical methodology Trade Open. Financial Open. Descriptive analysis Monetary Growth model Budgetary Econometric approach Results and interpretation Credibility Institution Q. Financial Dev. Growth dynamics Literature and Model Estimation results Conclusion Eco Growth Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 6 / 16
Empirical methodology Descriptive analysis Conference Descriptive statistics ( Goups : MI vs Other ASS ) UEMOA/FERDI Issiaka COULIBALY Introduction Motivation Contribution Literature review : identification of channels Empirical methodology Descriptive analysis Growth model Econometric approach Results and interpretation Growth dynamics Literature and Model Figure : Trade openness, MI and Growth Estimation results Conclusion ◮ ր fiscal discipline ; ր International trade ; ր Financial Inte- gration ⇒ greater economic growth . ◮ Moderate inflation and lower outstanding debt also. ◮ Counter-intuitive results for financial development and ins- titutional quality. Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 7 / 16
Empirical methodology Growth model Conference Growth model (1) UEMOA/FERDI Issiaka COULIBALY Introduction Motivation Contribution y it = c + α i + η t + γ D MI + β j X it , j + θ T it + γ cro D MI T it + ξ it (1) Literature review : identification of y it =growth rate in country (i=40) over the period ( t=6 ) ; channels Empirical c =constant ; α i =country specific effects ; η t =time effects ; methodology X it , j = j th control variable. Several variables indicated in the literature Descriptive analysis Growth model Econometric approach (Sala-i-Martin, 1997 ; Durlauf et al., 2005). Results and interpretation Growth dynamics Choice of X it , j : BMA framework developed by Fernández et al. Literature and Model (2001), Brock and Durlauf (2001) and Sala-i-Martin et al. (2004). Estimation results Conclusion ⇒ In this study : Initial GDP ; Investment ; Human Capital (Life) ; Terms of trade growth ( ∆ TOT ) using the LIBMA of Tsangarides (2005). Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 8 / 16
Empirical methodology Econometric approach Conference Growth model (2) UEMOA/FERDI Issiaka COULIBALY Introduction D MI =1 if the country belongs to a monetary union and 0 otherwise. Motivation Contribution T it =potential transition variables. Literature review : identification of ⇒ Trade and Financial openness (TO and FI) ; channels ⇒ Institutional and financial development (IQ and FD) ; Empirical ⇒ Four macroeconomic instability indicators : σ Inflation , σ GOVS , methodology Descriptive analysis outstanding debt (Debt) and current account balance (CA). Growth model Econometric approach Hypothesis to test : γ and γ cro significant ? > 0 ? or < 0 ? Results and interpretation ⇒ Marginal effect of MI : ˆ γ + ˆ γ cro ∗ T . Growth dynamics ⇒ Potential threshold : T ∗ = − ˆ Literature and Model γ/ ˆ γ cro . Estimation results Conclusion Econometric methodology : FGLS ; Hausman and Taylor ( HT ) and System GMM ( SysGMM ). Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 9 / 16
Empirical methodology Results and interpretation Conference Direct effect of MI UEMOA/FERDI Issiaka COULIBALY (1) (2) (3) (4) (5) (6) Introduction VARIABLES FGLS HT SysGMM FGLS HT SysGMM Motivation Initial GDP -0.37*** -0.38* -0.30 -0.40*** -0.35 -0.14 Contribution (0.12) (0.22) (0.67) (0.13) (0.23) (0.74) Investment 0.15*** 0.21*** 0.16*** 0.16*** 0.22*** 0.16*** Literature review : (0.02) (0.02) (0.05) (0.02) (0.02) (0.06) identification of Life -0.02 0.05 0.02 -0.02 0.04 0.02 channels (0.03) (0.05) (0.04) (0.03) (0.04) (0.04) Empirical ∆ TOT 0.07* 0.06* 0.07* 0.08* 0.06** 0.07* methodology (0.04) (0.03) (0.04) (0.04) (0.03) (0.04) D MI -0.64 -0.69 -0.58 Descriptive analysis (0.51) (1.03) (1.07) Growth model D CAEMC -0.89 -1.81 -1.73 Econometric approach (0.84) (1.54) (1.84) Results and interpretation D WAEMU -0.18 0.18 -0.36 (0.65) (1.23) (1.63) Growth dynamics D RMA -1.23 -1.16 -0.67 Literature and Model (0.87) (1.67) (1.36) Estimation results Constant 3.58 -1.46 0.44 3.93* -1.35 -1.10 Conclusion (2.25) (3.55) (5.74) (2.33) (3.53) (6.06) Observations 188 226 226 188 226 226 Prob. Hausman test 0.00 0.00 Prob. Hansen 0.276 0.306 Prob. AR(2) 0.473 0.482 Note : *** p<0.01, ** p<0.05, * p<0.10 and Standard errors in parentheses. Issiaka COULIBALY Conference UEMOA/FERDI 13 December 2016 10 / 16
Recommend
More recommend
