5 - An Alternative Theoretical Model for Economic Reforms in Africa
Corresponding Author(s) : Kingsley I. Obiora
Africa Development,
Vol. 32 No. 4 (2007): Africa Development
Abstract
This paper offers an alternative model for economic reforms in Africa. It proposes that Africa can still get on the pathway of sustained economic growth if economic reforms can focus on a key variable, namely, the price of non-tradables. Prices of non-tradables are generally less in Africa than in advanced economies, and the typical basket of goods for many Africans will contain more non-tradables, while the reverse is the case in advanced economies. Working through its effect on the real exchange rate and given some plausible assumptions, this paper demonstrates that economic reforms which reduce the price of non-tradables in Africa vis-à-vis the price of non-tradables in advanced economies can lead to real exchange rate depreciation, a rise in net exports, an avoidance of the “Dutch Disease” syndrome and a rise in per capita income. The paper concludes that any economic reforms that either skew consumption in Africa in favour of non- tradables vis-à-vis tradables or that reduce the price of non-tradables in Africa vis-à-vis non-tradables in advanced economies is likely to be welfare-improving.
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- Black, J., 2002, Oxford Dictionary of Economics, Oxford: Oxford University Press.
- Co den, W. M., 1981, Inflation, Exchange Rate and the World Economy, Oxford: Oxford University Press.
- Dooley, M., Fernandez-Ariaz, E., and Kletzer K., 1996, ‘Is Debt Crisis History? Recent Private Capital Inflows to Developing Countries’, World Bank Economic Review, Vol. 10, No. 1, pp 27-50.
- Fernandez-Arias, E. and Montiel P.J., 1996, ‘The Surge in Capital Inflows to Developing Countries: An Analytical Overview’, World Bank Economic Review, Vol. 10, No. 1, pp 51-77.
- Helmers, F.L.C.H., 1988, The Real Exchange Rate in the Open Economy, Oxford: Oxford University Press.
- Hossain, A. and Chowdhury, A., 1998, Open-Economy Macroeconomics for Developing Countries, Massachusetts: Edward Edgar.
- International Monetary Fund, 1973, Annual Report. Washington, DC, September.
- Iyoha, M., 1973, ‘Inflation and Openness in Less Developed Economies: A Cross Country Analysis’, Economic Development and Cultural Change, Vol. 22, No. 1, pp 31-37.
- Krueger, A., 1978, Foreign Trade Regimes and Economic Development: Liberalisation Attempts and Consequences, New York: NBER.
- Lewis, W. A., 1980, ‘Slowing down the Engine of Growth’, Economic Journal, Vol. 90, No.4, pp 555-564.
- Rao, V.K.R.V., 1952, ‘Investment, Income and the Multiplier in an Underdeveloped Economy’, Indian Economic Review, Vol.14, No.1, pp 55-67.
- Sachs, J. and Larrain, F.,1993, Macroeconomics in the Global Economy, New York: Harvester Wheatsheaf.
- Salter, W., 1959, ‘Internal and External Balance: The Role of Price and Expenditure Effects’, Economic Record, Vol.35, pp 226-238.
- Triffin, R. and Grubel, H., 1962, ‘Adjustment Mechanism to Differential Rates of Monetary Expansion among the Countries of the European Economic Community’, Review of Economics and Statistics, Vol. 44, pp 486-491.
- Whitman, M., 1969, ‘Economic Openness and International Financial Flows’, Journal of Money, Credit and Banking, Vol. 1, pp 727-749.
References
Black, J., 2002, Oxford Dictionary of Economics, Oxford: Oxford University Press.
Co den, W. M., 1981, Inflation, Exchange Rate and the World Economy, Oxford: Oxford University Press.
Dooley, M., Fernandez-Ariaz, E., and Kletzer K., 1996, ‘Is Debt Crisis History? Recent Private Capital Inflows to Developing Countries’, World Bank Economic Review, Vol. 10, No. 1, pp 27-50.
Fernandez-Arias, E. and Montiel P.J., 1996, ‘The Surge in Capital Inflows to Developing Countries: An Analytical Overview’, World Bank Economic Review, Vol. 10, No. 1, pp 51-77.
Helmers, F.L.C.H., 1988, The Real Exchange Rate in the Open Economy, Oxford: Oxford University Press.
Hossain, A. and Chowdhury, A., 1998, Open-Economy Macroeconomics for Developing Countries, Massachusetts: Edward Edgar.
International Monetary Fund, 1973, Annual Report. Washington, DC, September.
Iyoha, M., 1973, ‘Inflation and Openness in Less Developed Economies: A Cross Country Analysis’, Economic Development and Cultural Change, Vol. 22, No. 1, pp 31-37.
Krueger, A., 1978, Foreign Trade Regimes and Economic Development: Liberalisation Attempts and Consequences, New York: NBER.
Lewis, W. A., 1980, ‘Slowing down the Engine of Growth’, Economic Journal, Vol. 90, No.4, pp 555-564.
Rao, V.K.R.V., 1952, ‘Investment, Income and the Multiplier in an Underdeveloped Economy’, Indian Economic Review, Vol.14, No.1, pp 55-67.
Sachs, J. and Larrain, F.,1993, Macroeconomics in the Global Economy, New York: Harvester Wheatsheaf.
Salter, W., 1959, ‘Internal and External Balance: The Role of Price and Expenditure Effects’, Economic Record, Vol.35, pp 226-238.
Triffin, R. and Grubel, H., 1962, ‘Adjustment Mechanism to Differential Rates of Monetary Expansion among the Countries of the European Economic Community’, Review of Economics and Statistics, Vol. 44, pp 486-491.
Whitman, M., 1969, ‘Economic Openness and International Financial Flows’, Journal of Money, Credit and Banking, Vol. 1, pp 727-749.