Ghanaian Journal of Economics - Volume 3, Issue 1, 2015
Volume 3, Issue 1, 2015
Source: Ghanaian Journal of Economics 3, pp I –II (2015)More Less
The 3rd volume of the Ghanaian Journal of Economics presents stimulating articles with far reaching policy implications. The first of five articles published in this volume is a contribution by Francis Mulangu of the African Centre for Economic Transformation (ACET), based in Accra, Ghana. The article provides evidence of the impact of the African Growth and Opportunities Act (AGOA) and its apparel provision on firm-level productivity and employment. The paper establishes that AGOA and its apparel provision's impacts on employment are weak but they exert a positive impact on firm productivity. The paper recommends a review of policy variables such as customs efficiency, business licensing and permit delays, and regulation burden in order to expedite the potential of AGOA in increasing employment and productivity in Africa.
Preferential trade agreements, employment and productivity : evaluating the impacts of AGOA and its apparel provisions on African firmsAuthor Francis MulanguSource: Ghanaian Journal of Economics 3, pp 4 –27 (2015)More Less
We evaluate the impacts of general African Growth and Opportunities Act (AGOA) eligibility and eligibility for its apparel provision on firm-level employment and productivity. Based on the Stolper-Samuelson theorem, we hypothesized that AGOA would positively affect firm employment and productivity. In order to unbiasedly evaluate the impact of the policies and address both the limitations associated with non-experimental data and potential spillover effects, we used a difference- in-difference-in-differences specification to specifically account for both country- level and industry-level confounders in our empirical analysis. results show that while aGoa and its apparel provision's impacts on employment are weak, they exerted a positive impact on firm productivity. This productivity growth was due to a reallocation of economic activities from less productive to more productive firms. As sub-Saharan African countries consider new trade agreements, such as Economic Partnership agreements (EPas), our paper recommends a review of important factors, such as customs efficiency, business licensing and permit delays, and regulation burden, as they will influence the extent to which firms can benefit from these agreements.
Author George TweneboahSource: Ghanaian Journal of Economics 3, pp 24 –88 (2015)More Less
This paper provides evidence on the effects of dollarization on the volatility of nominal and real Ghana cedi/U.S. dollar exchange rate for the period January 1990 to March 2015 using exponential Generalized Autoregressive Conditional Heteroske-dasticity (E-Garch) model. The results provide evidence of a positive impact of dollarization on the volatility of nominal bilateral GHS/USD exchange rates. This suggests that as the demand for U.S. dollars becomes more extensive, the cedi/dollar exchange rate becomes more volatile and unstable. The asymmetry parameter implies that a positive shock in the underlying error term has the same effect as a negative shock of the same magnitude on the volatility function of the bilateral exchange rates. Addressing the increasing dollarization of the Ghanaian economy would be an appropriate policy to stabilise the cedi.
Exchange rate forecasting in the West African Monetary Zone : a comparison of forecast performance of time series modelsSource: Ghanaian Journal of Economics 3, pp 45 –66 (2015)More Less
It has become an undisputable fact in economics and finance that conventional exchange rate determination models cannot outperform the Random Walk Model (RWM) in out-of-sample forecasting. We evaluate the empirical veracity of this well-known fact in the West African Monetary Zone (WAMZ). We compare the out- of-sample forecast accuracy of the random walk hypothesis vis-a-vis the autore- gressive integrated moving average (arima) model, Generalised auto-regressive Conditional Heteroskedastic (GARCH) based models, and Vector Auto-regressive (Var) model. The root mean square error (rmsE) is used as the measure of forecast accuracy. We find evidence to refute the body of economic literature that supports the view that forecasts from the RWM are unbeatable. We show that if a non-linear RWM is estimated, and the RMSE is used as the measure of forecast performance, the Var model, the arima model, and the Garch (-m) model generally outper- form the RWM. However, when the assumption of linearity is sustained, the RWM convincingly outperforms all other models. We show that the type of model to use to achieve forecast accuracy depends on the time horizon, and the country for which the forecast is to be made.
Source: Ghanaian Journal of Economics 3, pp 70 –108 (2015)More Less
This study examines the risk factors of loan defaults in the microfinance industry in Ghana and develops a model for assessing credit worthiness of customers in that sector. A binomial logistic model was fitted to a dataset of 472 customers. The findings identified that the loan officer, personal guarantors, age of customer, type of residence, type of collateral and assessment are key predictors of default. a test of the full model against a baseline model was statistically significant, indicating that the predictors, as a set, reliably distinguished defaulters and non-defaulters. The Receiver Operating Characteristic (ROC) that measures the sensitivity and specificity of the model was significant. Using a hold out sample, the model is able to classify defaulters and non-defaulters with at least 80% accuracy. The model could serve as a tool to manage and improve loan application decisions and ultimately improve enterprise profitability of microfinance institutions.
Source: Ghanaian Journal of Economics 3, pp 86 –108 (2015)More Less
In this paper, we model the dependence structure between economic forces and stock market returns in Ghana. Quantile regressions are employed to examine the relation- ships between exchange rates, consumer prices, Treasury bill rate and money supply; and commodity prices such as gold, cocoa, and crude oil, on one hand, and returns on the Ghana stock market on the other hand from January 1992 to June 2015. Our results generally show dependence of the equity market returns on all economic variables in the period before oil production in Ghana. However, variations exist in the post oil production period. The results further demonstrate how equity investors in Ghana can take advantage of gold as a safe-haven to diversify most downside risk in turbulent periods of the market.