Department of Banking and Finance
Permanent URI for this collectionhttp://197.255.125.131:4000/handle/123456789/34586
Browse
2 results
Search Results
Item Firm Productivity in the Presence of Binding Fiscal Constraints in Africa(2016-04-22) Bokpin, G.We examine two key questions in this paper. First, we investigate the implications of fiscal indiscipline or otherwise on firm productivity in Africa. Fiscal policy is known to boost growth by altering work and investment incentives, promoting human capital accumulation, and enhancing total factor productivity at the micro-level (IMF, 2015). Many factors have been studied in explaining total factor productivity in Africa or its sub-regions but the role of fiscal policy in explaining firm productivity remains understudied. Yet fiscal policy is considered a binding constraint in Africa. Fiscal indiscipline is known to crowd-out the private sector and seriously undermines private sector leadership in ensuring all inclusive, broad-based growth. We measure firm-level total factor productivity using a Cobb-Douglas production function, when we regress on firm characteristics and fiscal policy indicators. In estimations with controls for country and year fixed effects, we find results that suggests firms reporting finance as a severe obstacle have relatively lower productivity levels, productivity declined with age, and audited firms are more productive than those not audited. The level of government debt to GDP, we found, had significant implications for the relation between access to finance severity and firm productivity. Fiscal Indiscipline (in its various forms) severely constraints firm productivity. The implications are that fiscal mismanagement has implications for firm-level productivity.Item Stop Firing the Guns!: Conflict Mitigates the Positive Effect of FDI on Economic Growth.(2016-03-18) Agbloyor, E.K.This paper reexamines the relationship between FDI and economic growth in SSA. For the first time in this area of study, the paper examines this relationship after sifting out the effect of wars. We examine the empirical relations using a Two-Step SGMM estimator with orthogonal deviations, small sample size adjustments and robust standard errors. We find that in the full sample FDI does not exert any influence on economic growth. However, when we drop countries that have been affected by conflict, we see clearly in accordance with economic theory, that FDI has a positive influence on growth. In addition, alternative approaches using dummy variables to represent countries that have been plagued by conflict suggest that the effect of FDI on growth is lower in conflict affected countries. Finally, we find empirical support for what we term the ‘good boy’ hypothesis. Countries that have entered into war only once, exited war and never returned to war for a minimum of six years do not produce a negative interaction with FDI. These countries are now able to benefit from FDI. In essence, these countries have been ‘purged’ from the war tag. First, these results reveal the shortfalls of the many studies that have found a negative or no impact of FDI on growth. If countries want to grow and benefit from FDI, then they must strive to avoid violent conflicts! For countries that have already entered into war, avoiding a recurrence also pays significant dividends.