Democracy and Education Spending: Has Africas Move to Multiparty Elections Made a Difference to Policy?

While it is generally recognized that electoral competition can have a major influence on public spending decisions, there has been little effort to consider whether the move to multiparty elections in African countries in recent years has led to a redistribution of public expenditures between social groups. In this paper I develop a hypothesis, illustrated with a simple game-theoretic model, which suggests that the need to obtain an electoral majority may have prompted African governments to devote greater resources to primary schools. I test this proposition using panel data on electoral competition and education spending in thirty-five African countries over the period 1981-1996. The results show that democratization has indeed been associated with greater spending on primary schools, and these findings are robust to controls for unobserved country effects. They are also supported by evidence from recent country cases. Though the reemergence of multiparty democracy in Africa has not led to a wholesale transformation of economic policies, these findings nonetheless suggest that it may be having a significant impact in individual policy areas.Primary education, political economy, democracy, electoral competition.

Electoral Competition and Public Spending on Education: Evidence from African Countries.

Electoral competition can have a significant influence on government decisions regarding public spending. In this paper I examine whether the move to multiparty elections in many African countries in the last ten years has been associated with a clear change in priorities for public spending on education. In particular, I argue that the need to obtain an electoral majority may have prompted governments to devote greater resources to primary schools. I test this hypothesis using panel data on electoral competition and education spending in thirty-five African countries over the period 1980-1999. The results strongly support the hypothesis and are robust to controls for both unobserved country effects and other determinants of spending.

Monetary Policy in the CFA Zone: Country-level Credit Policy

monetary policy, CFA zone, credit control

Are cash budgets a cure for excess fiscal deficits (and at what cost)?

This paper investigates the effect of recent reforms of budgetary institutions in Uganda and Zambia. We argue that cash budgeting has brought clear benefits in terms of improved expenditure control with regard to line ministries. However, contrary to what is often suggested, adoption of a cash budget has not provided a means for top politicians in either country to “tie their hands” with respect to intervention in fiscal policy decisions. In Uganda improved fiscal policy outcomes have, in fact, been achieved as a result of (and not in spite of) discretionary interventions by top politicians. In Zambia, a strict rule imposing a balanced budget on a monthly basis both ineffective as a commitment device and costly in terms of increased volatility of expenditures.

Making and breaking monetary policy rules: the experience of African countries

This paper analyses the experience with rule-based monetary policy in African countries which have participated in monetary unions (CFA Franc Zone, Eastern African Currency Board and Rand Monetary Area). We show that African countries have generally lacked the domestic political institutions which would allow individual governments to tie their hands by establishing such rules. Monetary unions have proved to be an alternative possibility for credible commitment to sound macroeconomic policies, but only in cases where exit from a union is made costly by the provision of side-payments (or sanctions) in other areas of regional co-operation, and only when governance structures have been designed so as to maximise chances for the enforcement of monetary rules. We conclude by making suggestions about the design of African monetary unions.

Improving Policy Credibility: Is There a Case for African Monetary Unions?

This paper analyses the experience with monetary policy in African countries which have participated in rule-based international monetary arrangements (CFA Franc Zone, Eastern African Currency Board and Rand Monetary Area). It argues that African countries have generally lack the political institutions necessary for governments to credibly commit through domestic institutions (exchange rate pegs or independent central banks). For such countries, monetary unions can provide an alternative source of credible commitment to sound macroeconomic policies, but only when exit from a union is made costly by the existence of parallel regional accords, and only when governance structures of monetary unions have been designed so as to maximise chances for the enforcement of monetary rules.

When does delegation improve credibility? Central Bank independence and the separation of powers

Delegation and policy rules are frequently suggested strategies for governments to establish credible commitments. Existing literature on rules and delegation in macroeconomic policy has generally avoided the question of why governments that delegate or establish rules do not subsequently reverse this decision. Either the decision is assumed to be irreversible, or reversal is assumed to be “politically costly” without further explanation. We develop several hypotheses which suggest that the difficulty in reversing a decision to delegate (or to establish a rule) depends on the structure of a country’s political institutions. Credible commitment through delegation can only be obtained in countries where political institutions provide for checks and balances on executive authority. Checks and balances ensure that the decision to override a legally independent central bank is not the prerogative of a single actor (or veto player). In countries with these characteristics, the extent of credibility gains will be greatest when political instability is moderate and when polarization is high. We find support for these hypotheses in tests using cross-country data - from both developed and developing countries - on central bank independence and political institutions.

Monetary Policy in the Franc Zone: Estimating Interest Rate Rulesfor the BCEAO

monetary policy, monetary policy rules, CFA zone, credit control

Checks and balances, private information, and the credibility of monetary commitments

The authors develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies. Theory provides strong reason to believe that while central bank independence will prove more effective as a commitment mechanism in countries where multiple players in government have veto power (checks and balances), the number of veto players will have no effect on the credibility of exchange rate pegs. Conversely, the authors argue that central bank independence does not solve the problems of commitment that arise when citizens are imperfectly informed about the contribution of government policy to inflation. Exchange rate pegs, however, mitigate these problems. The authors present extensive evidence from cross-country tests using newly developed data thatprovide strong support for their propositions.Economic Stabilization,Economic Theory&Research,Macroeconomic Management,Environmental Economics&Policies,Financial Intermediation

Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve

When central banks are transparent about their decision making, there may be clear benefits in terms ofcredibility, policy effectiveness, and improved democratic accountability. While recent literature has focusedon all of these advantages of transparency, in this paper we consider one potential cost: the possibility thatpublishing detailed records of deliberations will make members of a monetary policy committee more reluctantto offer dissenting opinions. Drawing on the recent literature on expert advisors with ¿career concerns¿, weconstruct a model that compares incentives for members of a monetary policy committee to voice dissent whendeliberations occur in public, and when they occur in private. We then test the implications of the model usingan original dataset based on deliberations of the Federal Reserve¿s Federal Open Market Committee, askingwhether the FOMC¿s decision in 1993 to begin releasing full transcripts of its meetings has altered incentivesfor participants to voice dissenting opinions. We find this to be the case with regard to both opinions on shortterminterest rates and on the ¿bias¿ for future policy.transparency, central banking, career concerns