The Role of Knowledge Economy in African Business

This paper assesses the role of knowledge economy (KE) in African business in 53 countries for the period 1996-2010. The four KE components of the World Bank are employed, notably: education, innovation, economic incentives & institutional regime and information & communication technology. The business indicators are classified into: starting, doing and ending business. Principal components analysis and panel instrumental variable fixed effect approaches are employed as empirical strategies. The findings which are broadly consistent with intuition and the predictions of economic theory suggest that KE policies will substantially boost the starting and doing of business in Africa. This is relevant in fighting unemployment and improving African competitiveness in global value chains. Policy implications for the relevance of each specific KE dimension in African business are discussed with particular emphasis on the theoretical underpinnings of the study. The investigation is original in its contribution at the same time to the scarce literature on African KE and the growing challenges of improving the business climate of the continent by means of KE

The Impact of Entrepreneurship on Knowledge Economy in Africa

Purpose - The paper assesses how entrepreneurship affects knowledge economy (KE) in Africa. Design/methodology/approach – Entrepreneurship is measured by indicators of starting, doing and ending business. The four dimensions of the World Bank’s index of KE are employed. Instrumental variable panel fixed effects are applied on a sampled of 53 African countries for the period 1996-2010. Findings –The following are some findings. First, creating an enabling environment for starting business can substantially boost most dimensions of KE. Second, doing business through mechanisms of trade globalisation has positive effects from sectors that are not ICT and High-tech oriented. Third, the time required to end business has negative effects on KE. Practical implications – Our findings confirm the narrative that the technology in African countries at the moment may be more imitative and adaptive for reverse-engineering in ICTs and high-tech products. Given the massive consumption of ICT and high-tech commodities in Africa, the continent has to start thinking of how to participate in the global value chain of producing what it consumes. Originality/value – This paper has a twofold motivation. First, given the ambitions of African countries of moving towards knowledge based economies, the line of inquiry is timely. Second, investigating the nexus may have substantial poverty mitigation and sustainable development implications. These entail inter alia: the development of technology with value-added services; enhancement of existing agricultural practices; promotion of conditions that are essential for competitiveness and adjustment of globalization challenges

The Comparative African Economics of Governance in Fighting Terrorism

This study assesses the comparative economics of governance in fighting terrorism in 53 African countries for period 1996-2012. Four terrorism variables are used, namely: domestic, transnational, unclear and total terrorism dynamics. Nine bundled and unbundled governance variables are employed, notably: political stability/no violence, voice & accountability, political governance, government effectiveness, regulation quality, economic governance, corruption-control, the rule of law and institutional governance. The empirical evidence is based on Fixed Effects regressions. In the analytical procedure, we first bundle governance indicators by means of principal component analysis before engaging the empirical exercise with the full sample. In the final step, specifications are based on a decomposed full sample in order to articulate the fundamental characteristics for comparative purposes. The following broad findings are established. First, good governance is an appealing tool in fighting terrorism. Second, the relevance of the good governance dynamics is as follows in order of increasing relevance: economic governance, institutional governance and political governance. The findings are presented in increasing order of magnitude to emphasise fundamental features in which governance dynamics have the highest effect in mitigating terrorism

The Comparative African Economics of Inclusive Development and Military Expenditure in Fighting Terrorism

This study investigates the role of inclusive human development and military expenditure in fighting terrorism in 53 African countries for the period 1998-2012. The empirical evidence is based on contemporary, non-contemporary and instrumental variable Fixed Effects regressions. Inclusive development is not a sufficient condition for the fight against terrorism whereas military expenditure can be effectively employed to mitigate the phenomenon. Significant negative effects are established only when endogeneity is accounted for by means of non-contemporary and instrumental-variables approaches. Hence, the policy effectiveness of employed tools is contingent on whether they are engaged proactively (i.e. non-contemporarily) or not. From the findings, the propensity of military expenditure to fight transnational terrorism is higher in: (i) middle income countries vis-à-vis their low income counterparts; (ii) oil-rich countries compared to oil-poor countries and (iii) Christian-dominated countries vis-à-vis their Islam-oriented counterparts. Furthermore military expenditure is also more effective at combating domestic and transnational terrorism in: (i) North African countries vis-à-vis their sub-Saharan Africa counterparts; (ii) landlocked countries compared to countries that are open to the sea and (iii) politically-stable countries vis-à-vis their politically-unstable counterparts. Contributions to the comparative economics are discussed. Practical and theoretical contributions are also provided

Fighting terrorism in Africa when existing terrorism levels matter

This study examines policy tools in the fight against terrorism when existing levels of terrorism matter in 53 African countries for the period 1998-2012. The empirical evidence is based on contemporary, non-contemporary and Instrumental Variable Quantile regressions (QR) which enable the investigation throughout the conditional distributions of domestic, transnational and total terrorism dynamics. The following findings are established. First, counterterrorism policy instruments of inclusive human development and military expenditure further fuel terrorim. Second, political stability negatively affects terrorism with a negative threshold effect. Political stability estimates are consistently significant with increasing negative magnitudes throughout the conditional distributions of domestic and total terrorism. Policy implications are discussed

Foreign aid, education and lifelong learning in Africa

This study investigates the effect of foreign aid on education and lifelong learning in 53 African countries for the period 1996-2010. Three main issues are assessed, notably: (i) the effect of aid on education; (ii) the incremental impact of aid on education and (iii) the effect of aid on lifelong learning. Lifelong learning is measured as the combined knowledge acquired during the primary, secondary and tertiary levels of education. Foreign aid dynamics include: Total aid, aid from Multilateral Donors (MD) and aid from the Development Assistance Committee (DAC) countries. The empirical evidence is based on an endogeneity-robust Generalized Method of Moments. The following findings are established. First, the aid variables have positive effects on primary school enrolment and lifelong learning, with the exception of aid from MD which positively affects only lifelong learning. Second, the positive effect on primary school enrolment consistently has a higher magnitude compared to the corresponding impact on lifelong learning. Third, the effects of aid dynamics on secondary and tertiary school enrolments are not significant. We also contribute to the literature by proposing an indicator of lifelong learning for developing countries

Mobile Phones in Conflicts of Financial Intermediation

To the best our knowledge, in the first empirical macroeconomic examination of the nexus between financial intermediation and mobile phones, Asongu employs two conflicting financial system definitions in the assessment of how mobile phones have stimulated financial development in Africa. Within the framework of the dominant International Monetary Fund’s International Financial Statistics (2008) definition, mobile phones are established to be negatively associated with financial intermediary dynamics of depth, activity and size. Conversely, when the previously neglected informal financial sector is integrated into the conception, definition and measurement of the financial system, mobile phones are positively (negatively) correlated with the informal (formal) financial intermediation sector. The empirical evidence is based on 52 African countries. Causality in the established linkages has been confirmed in subsequent studies by the same author. At least three policy implications derive from the findings. First, the role of informal financial intermediation is increasing to the detriment of formal financial mechanisms. Second, in order to capture the positive effect of mobile phones on finance, it is imperative to integrate the missing informal financial sector component into the IMF definition of the financial system. Third, it is a wake-up call for more scholarly research on: (i) macroeconomic financial development implications of mobile phone penetration and (ii) monetary policy instruments in the face of burgeoning ‘mobile phone’-oriented financial intermediation

Information Sharing and Financial Sector Development in Africa

This study investigates the effect information sharing has on financial sector development in 53 African countries for the period 2004-2011. Information sharing is measured with private credit bureaus and public credit registries. Hitherto unexplored dimensions of financial sector development are employed, namely: financial sector dynamics of formalization, informalization and non-formalization. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalised Method of Moments (GMM). The following findings are established. Information sharing bureaus increase (reduce) formal (informal/non-formal) financial sector development. In order to ensure that information sharing bureaus improve (decrease) formal (informal/non-formal) financial development, public credit registries should have between 45.45 and 50 percent coverage while private credit bureaus should have at least 26.25 percent coverage

The Comparative African Economics of Inclusive Development and Military Expenditure in Fighting Terrorism

This study investigates the role of inclusive human development and military expenditure in fighting terrorism in 53 African countries for the period 1998-2012. The empirical evidence is based on contemporary, non-contemporary and instrumental variable Fixed Effects regressions. Inclusive development is not a sufficient condition for the fight against terrorism whereas military expenditure can be effectively employed to mitigate the phenomenon. Significant negative effects are established only when endogeneity is accounted for by means of non-contemporary and instrumental-variables approaches. Hence, the policy effectiveness of employed tools is contingent on whether they are engaged proactively (i.e. non-contemporarily) or not. From the findings, the propensity of military expenditure to fight transnational terrorism is higher in: (i) middle income countries vis-à-vis their low income counterparts; (ii) oil-rich countries compared to oil-poor countries and (iii) Christian-dominated countries vis-à-vis their Islam-oriented counterparts. Furthermore military expenditure is also more effective at combating domestic and transnational terrorism in: (i) North African countries vis-à-vis their sub-Saharan Africa counterparts; (ii) landlocked countries compared to countries that are open to the sea and (iii) politically-stable countries vis-à-vis their politically-unstable counterparts. Contributions to the comparative economics are discussed. Practical and theoretical contributions are also provided

The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency

The study assesses the role of globalization-fuelled regionalization policies on financial allocation efficiency in four economic and monetary regions in Africa for the period 1980 to 2008. Banking system and financial system efficiencies are used as dependent variables whereas seven bundled and unbundled globalization variables are employed as independent indicators. The bundling exercise is achieved by means of principal component analysis while the empirical evidence is based on interactive Fixed Effects regressions. The following findings are established. First, financial allocation efficiency is more sensitive to financial openness compared to trade openness and most sensitive to globalization. The relationship between allocation efficiency and globalization-fuelled regionalization policies is: (i) Kuznets or inverted U-shape in the UEMOA and CEMAC zones (evidence of decreasing returns to allocation efficiency from globalization-fuelled regionalization) and (ii) U-shape overwhelmingly in the COMESA and scantily in the EAC (increasing returns to allocation efficiency from globalization-fuelled regionalization). Established shapes are relevant to specific globalization dynamics within regions. ‘Economic and monetary’ regions are more prone to surplus liquidity than purely economic regions. Policy implications and measures of fighting surplus liquidity are discussed