Sources of macroeconomic fluctuations and stabilization policies in African economies

[摘要] The thesis focuses on the sources of macroeconomicuctuations in ten (10)selected African economies over the period 1990-2011. Data for the studywere obtained from the International Financial statistics (IFS), the WorldBank, and Central Bank database of the selected countries. We formulatea dynamic stochastic general equilibrium (DSGE) model for the thesis. Weestimate the model using quarterly time series data. Due to data availability,the sample size di¤ers from one country to the other. First, we investigatethe relative contributions of internal and external shocks to economicuc-tuations in African economies. Second, we evaluate the signi cance of thebalance sheet channel in African economies. Third, we investigate the ef-fectiveness of sovereign wealth funds in reducing macroeconomic volatilitycaused by commodity price shocks. The thesis has 5 chapters. Chapter 1 isthe general introduction. Chapters 2, 3, and 4 are stand-alone related paperson macroeconomicuctuations. Chapter 5 is the conclusion.Chapter 1 introduces the study. We discuss the research problem, the moti-vation, the objectives, and the research questions. We also explain both ourtheoretical and empirical contributions to the literature. Moreover, we high-light the signi cance and the keyndings of the study. Finally, we concludethe chapter with a brief outline on the organisation of the study.Chapter 2 investigates the relative contributions of internal and externalshocks to macroeconomicuctuations in African economies. We formulateand estimate a monetary DSGE model to examine the sources of economic uctuations in ten African countries. The model is estimated with theBayesian technique using twelve macroeconomic variables. Generally, the ndings indicate that both the internal and external shocks signi cantly in- uence outputuctuations in African countries. Over a four quarter horizon,internal shocks are dominant while over eight to sixteen quarter horizons, theexternal shocks are dominant. Among the external shocks, external debt, ex-change rate, foreign interest rate and commodity price shocks account for alarge part of output variations in African economies. Money supply andproductivity shocks are the most important internal shocks contributing tooutputuctuations in African countries. To ensure macroeconomic stability,African countries need to formulate appropriate exchange rate and exter-nal debt management policies, diversify the economies, and create sovereignwealth funds (SWFs) or use hedging instruments.Chapter 3 evaluates the quantitative signi cance of the balance sheet chan-nel in African economies. We construct an open economy monetary DSGEmodel where entrepreneursnance investment by issuing foreign currency-denominated debt. The model is estimated with Bayesian technique. Theevidence suggests that the balance sheet e¤ects are empirically important inAfrican economies. The marginal likelihood results clearly favour the modelwithnancial frictions. Moreover, thendings indicate that the balancesheet e¤ect reduces the e¤ectiveness of monetary policy, raises the sensitiv-ity of the risk premium to external debt, and contracts output. This indi-cates that exchange rate depreciation is contractionary in African economies.We conclude that African countries should reduce their exposure to foreigncurrency-denominated debt and also deepen their domestic bond markets.Chapter 4 investigates the e¤ectiveness of sovereign wealth funds (SWFs) inreducing macroeconomic volatility in commodity exporting African countries.We formulate and simulate a dynamic stochastic general equilibrium (DSGE)model that features SWFs. The simulation results suggest that the creationof SWFs can reduce macroeconomic volatility in commodity exporting coun-tries. Particularly, SWFs can reduce government expenditure, real exchangerate, and external debt volatility. Since these are the channels through whichcommodity price shocks are transmitted to the African economies, we rec-ommend that African countries should create SWFs to sterilize the in ow ofcommodity revenue and to prevent the resource curse problem.Chapter 5 concludes the study. We summarize the keyndings in Chapters2, 3, and 4. We highlight the policy implications of ourndings. Finally, wesuggest areas for further research.

[发布机构] University of the Witwatersrand