Macroeconomic Fluctuations and Deposit Dollarization in Sub-Saharan Africa: Evidence from Panel Data

The role played by macroeconomic fluctuations in stimulating deposit dollarization in developing countries have been a subject of intense debate in the last few decades especially in Latin America and transition economies of Eastern Europe with little attention on African economies. Apart from this, most of the studies on African economies are country case studies with little scope for generalisation. This article examines the effect of macroeconomic fluctuations on deposit dollarization in 18 selected Sub-Saharan Africa for the period 1980 to 2004. Using the standard money demand model accounting for dollarization in small open economies, the article finds that inflation, expectations about exchange rate changes coupled with interaction between capital account restrictions and domestic inflation plays dominant roles in explaining deposit dollarization in Sub-Sahara Africa. Given the consequences of deposit dollarization on the vulnerability of the domestic banking system, lack of independent monetary policy and optimal exchange rate choices, the article concludes that macroeconomic instability must be adequately brought under control in other to reduce deposit dollarization in these economies.Macroeconomic Fluctuations, Demand for Money, Deposit Dollarization, Panel Data and Sub-Saharan Africa

Exchange Rate Volatility, Currency Substitution and Monetary Policy in Nigeria

This study analyzes the implications of currency substitution and exchange rate volatility for monetary policy in Nigeria. It adopts the unrestricted portfolio balance model of currency substitution, incorporating exchange rate volatility within the framework of the Vector Error Correction (VEC) technique. Results from both impulse response and the forecast error variance decomposition functions suggest that exchange rate volatility and currency substitution responds to monetary policy with some lags meaning that monetary policy may be effective in dampening exchange rate volatility and currency substitution in the medium horizon but might not be effective in the short horizon. The study concludes that currency substitution was not an instant reaction to the slightest policy mistake rather; it was fallout from prolonged period of macroeconomic instability. The major sources of this instability in Nigeria were untamed fiscal deficits leading to high domestic inflation, real parallel market exchange rate volatility, and speculative business activities of market agents in the foreign exchange rate market and poor/inconsistent or uncertainty in public policies. In terms of policy choice, our result favours exchange rate based monetary policy as against interest based monetary policy for stabilization in dollarized economies like Nigeria.Demand for money, Exchange Rate Volatility, Currency Substitution, Monetary Policy and Nigeria

Exchange Rate Volatility and the extent of Currency Substitution in Nigeria

This study tests for the existence of currency substitution and attempts to gauge its magnitude in Nigeria. The analysis was based on a multi-perspective unrestricted portfolio balance model. The stock of foreign currency deposits in Nigeria and the ratio of deposits denominated in foreign currency in the domestic banking system to deposits denominated in the domestic currency were modelled. First, the study revealed the presence of currency substitution in the domestic banking system in Nigeria. A major factor driving this process was exchange rate volatility especially real parallel market exchange rate volatility. Also, the study demonstrates that currency substitution in Nigeria was low during the period under review and as such classified Nigeria as moderately dollarized economy. Subsequently, alternative policy options for curtailing currency substitution in Nigeria were explored. The study concludes that currency substitution is an element of Nigerians’ behaviour concerning wealth allocation and as such macroeconomic policies that ensure long periods of low inflation and exchange rate stability become the most powerful policy option that could help stabilize or reduce currency substitution. Also very paramount are the development of domestic financial markets with relevant infrastructural facilities and the development of new financial instruments, which will serve as alternatives to holding money in the domestic economy.Demand for money, Exchange Rate Volatility, Currency Substitution, Macroeconomic Aspects of International Trade and Finance, Nigeria

Dynamic Analysis of the impact of Capital Structure on Firm Performance in Nigeria

The thesis examines the dynamic impact of capital structure on firm performance in Nigeria. The aims of this thesis are; first, to investigate the impact of capital structure of firms on their performance in a dynamic framework. This is unlike previous studies in the capital structure literature that have used static analysis. Second, to examine the dynamic feedback from performance to capital structure using the two-step system generalized method of moment estimator. Third, to explore the determinants or variables that influence capital structure choice of firms in Nigeria and the rate of adjustment to achieve optimal debt position. Fourth, to assess the possibility of non-monotonicity effect of capital structure on firm performance and non-monotonicity effect of performance on capital structure. The second chapter discusses the theoretical framework and review the empirical literatures on capital structure and firm performance.Also, the chapter review empirical literature on firm performance and capital structure as well as on determinants of capital structure. The study find much evidence in support of the theoretical prediction of the agency cost theory of capital structure. The stuudy observed that there are limited empirical studies on the franchise value and efficiency-risk hypotheses of reverse causality from performance to capital structure.The empirical literatures on determinants of capital structure suggests that both firm specific and country factors are important variables that drive capital structure choice of firms. The thrid chapter examines the methodology of the study. The population, sampling and sampling size, estimation methods were discussed in this chapter. The fourth chapter analysis and described the data employed in the study.Specifically, the results of the dynamic relationship between capital structure and firm performance were presented in this chapter. The results indicate that capital structure has non-monotonic effect on firm performance thereby supports the agency cost theory of capital structure. The fifth chapter provides results on the reverse causality between performance and capital structure. The findings indicate that there is reverse causality between performance and capital structure. This is evidence in the statistically significant negative finding between performance and capital structure. This finding support the franchise value hypothesis. The findings of this study also reveal that non-monotonic relationship exist between performance and capital structure. The sixth chapter provides results on the determinants of capital structure of Nigerian firms. The findings indicate that both firm specific variables (return on equity, risk, profitablity, age, size, tangibility, growth opportunities, dividend, ownership) and country variables (inflation, interest rates, credit to private sector as percentage of gross domestic product, institutional quality) jointly influence capital structure choice of firms in Nigeria. The findings equally indicate that firms in Nigeria adjust to their optimal debt target relatively faster with lower cost of adjustment because of better access to private debt that public debt. Conclusions from the empirical chapters indicate that firm specific and country factors are major determinants of capital structure of firms in Nigeria and that capital structure choice of firms influence their performance. Equally, there is evidence that indicate that there is reverse causality from performance to capital structure of firms. The study therefore contend that the agency cost theory of capital structure and franchise value hypothesis are portable in the Nigerian context. Full portability of these theories in emerging market like Nigeria may require modifications to accommodate specific peculiarities of operating and business environment of Nigeria

Human Rights for Sale? A Study on the Uyghur Issue and Chinese Concessional Aid

The Uyghur issue refers to the ongoing internment by the People’s Republic of China’s government on their native Uyghur ethnic group, who primarily reside in the Xinjiang Province. Such activities are internationally considered an attack on human rights; however, many countries have defended the PRC actions on this subject, some of which receive heavy amounts of aid from the Asian country. The current paper creates a model to determine the likelihood for countries to support China’s actions in Xinjiang. The paper finds that while there is a strong relationship between receipt of aid and predictability for defending or criticizing the PRC’s internment activities, it appears that regime type is a more adept, more evident predictor

Trade-Off Theory of Optimal Capital Structure and Adjustment towards Long Run Target: A Dynamic Panel Approach

   This paper examines the speed and costs of adjustment towards target capital structure choice of Nigerian firms based on the data of 115 Nigerian non-financial firms listed on the Nigerian stock exchange, for the period 1998-2012. The study employed two step system Generalized method of moment in a dynamic panel framework. The main finding of the study indicates that negative relationship exists between speed and costs of adjustment of firms in Nigeria. The study therefore concludes that firms in emerging market like Nigeria adjust relatively faster towards their target debt position.    &nbsp

Impact of Digital Revolution on the Structure of Nigerian Banks

The study examined the extent to which digital revolution has affected the organizational structure of Nigerian banks. Twenty-five banks were selected for the study in south-western Nigeria. Interview was conducted for middle and top level managers and questionnaire was developed and administered to the other staff using a five-point Likert scale to determine the attitudes and opinions of the staff on the effects of digital revolution on the organizational structure of the banks. The mean was used as an indicator of central tendency for quantitative variables that have frequency distributions in the study. The study found that standard operating procedures, politics, culture, surrounding environment and management decisions were all affected by digital revolution. It affected the organizational balance of rights, privileges, obligations, responsibilities, and feelings that have been established over a long period of time. The revolution brought structural changes in the line and unit of command, the principles of span of control, unity of command, and scalar principle of graded chain of superiors in the studied banks. It encouraged flat organizations as decision making became more decentralized. It also altered the required skill and increased the perceived advantage of workers with computer engineering background. Authority relied on knowledge and competence and not on mere formal position The study concluded that digital revolution has changed the course of history in the banking industry leaving far reaching effects and implications on both the organizational and industrial structure. It is imperative for banks and their staff to effect proper restructuring that will facilitate optimal utilization of the benefits provided by the revolution.Digital Revolution, ICT, e-Commerce, Organizational Structure, Nigerian Banks

An analysis of employment intensity of sectoral output growth in Botswana

3Despite an impressive macroeconomic growth record in Botswanaover the past four decades, high unemployment and poverty incidences remain persistent and an intractable challenge of macroeconomic management in the country. The study explores the employment intensity of sectoral output growth in Botswana with a view to identifying key sectors of the Botswana economy that are employment intensive. To achieve this objective, the study used both simple elasticities and econometric procedures to provide empirical evidence concerning the extent to which economic growth that has occurred in Botswana is employment intensive and in which sectors. The fi ndings confi rmed the low labour absorptivecapacity of the Botswana economy at the aggregate and at sectoraldecompositions, suggesting the notion that growth performance inthe country is, after all, ’jobless growth’. With respect to policy, thestudy recommends a successful mineral-led economy that is able todiversify into sectors and activities that are by nature relatively morelabour-intensive

Global Financial Recovery and the Stability of Africa Emerging Stock Markets

This study investigates the impact of the global financial recovery on the stability condition of Africa emerging stock markets by employing the normality statistics and trends analyses and the use of the panel quantile regression technique to achieve this objective under daily all-share-indices covering the series range of 04/06/2008-05/05/2011; spanning 3-year period of 729 data sets and betting on the hypothesis that the global financial recovery guarantees the stability condition of Africa emerging stock markets. Our findings suggest that this hypothesis should be rejected as it could be fathomed that most emerging Africa stock markets are unstable not due solely to the effect of global financial crisis but in addition to the presence of some institutional and structural rigidities inherent in the typical African economies. Therefore, it could be right to infer that the global financial recovery (which largely exhibits “U” shape behaviour from recession), and by extension, the normality of global stock, is only a necessary but not sufficient condition to satisfy the stability condition of emerging stock markets, at least, in the context of Africa economies. Key Words: Business fluctuations; Stock Market; Financial Crisis; Regression