Back Matter

Back Matter

Author(s):
Joannes Mongardini, Tamon Asonuma, Olivier Basdevant, Alfredo Cuevas, Xavier Debrun, Lars Engstrom, Imelda Flores Vazquez, Vitaliy Kramarenko, Lamin Leigh, Paul Masson, and Genevieve Verdier
Published Date:
April 2013
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Index

Page numbers followed by f, n, or t refer to figures, footnotes, or tables, respectively.

A

Africa Growth and Opportunity Act, 9

Agricultural employment, 96f

B

Balassa-Samuelson effects, 107, 110

Bilateral exports data, 8, 13

  • results, 14–15, 16t–18t, 23–25

Bilateral imports data, 8, 13

  • results, 14–15, 19t–21t, 23–25

Bilateral trade, 8

  • controlling for currency unions, 28

  • controlling for infrastructure, 28

  • measuring trade expansion, diversion, creation, 29–30

  • methodology and estimation issues, 26–29

  • nonlinearities, 27

  • omitted variables, 27

  • positive effects, 25

  • predicting trade, 28

  • sample data and sources, 30 t– 34t

  • selection bias, 27

  • zero-trade observations, 26–27

BLNS. See Botswana, Lesotho, Namibia, and Swaziland

Border effects, 8

Botswana, Lesotho, Namibia, and Swaziland (BLNS), 2

  • compensations, 26

  • deficit bias, 58f

  • expenditure growth, 57t

  • exports and imports, 8–9, 10f, 11f

  • fiscal adjustment in, 3, 37

  • fiscal policy design options, 50–54

  • public finances, 35

  • revenue loss, 44

  • SACU revenue and grants, 36f, 38t, 39

  • trade data, 13–14

  • trade links, 23

C

Canada-U.S. Free Trade Agreement, 8

CCB. See Common central bank Central African Economic and Monetary Community (CEMAC), 14

  • export diversion, 15

Chile, 96, 106–7

CMA. See Common Monetary Area

Collective approach, 45

  • pros and cons, 40–41

  • simulation of structural component, 41–43, 42f

COMESA. See Common Market for Eastern and Southern Africa

Common central bank (CCB), 64–65, 75

  • regional, 81, 83

Common market, 1–2

  • establishment, 4–5

Common Market for Eastern and Southern Africa (COMESA), 8

  • export diversion, 15

  • trade creation, 23

  • trade expansion, 15

Common Monetary Area (CMA)

  • benefits, 1–3

  • central bank, treasury bills, inflation rates, 72f

  • characteristics, 70

  • compensation payments, 87

  • consultations, 87

  • currency arrangement, 86

  • economic indicators, 71t

  • expanding, 81

  • fiscal balance and government debt, 74f

  • GDP and, 3

  • gold and foreign exchange transactions, 87

  • history, 85t

  • hypothetical expansion, 77–78

  • inputs, 76t, 77t

  • institutional framework, 86–87

  • literature, 78

  • market access, 87

  • membership, 2

  • movements of funds, 86

  • reserve adequacy ratios, 73t

  • SACU and, 5, 41

Common Monetary Area, welfare effects

  • conclusion, 83–84

  • economic convergence, 69–73

  • gains and losses, 82t, 83t

  • hegemony versus regional common central bank, 81, 83

  • history and institutional arrangements, 68–69

  • literature review, 65–67

  • model-based assessments, 73–81, 76t, 77t, 79t, 80t

  • overview, 63–65

Compensation payments, 87

Consumption tax rates, 51

Corporation for Public Deposit in South Africa, 86

Countercyclical fiscal policy, 40, 43

Country-pair characteristics, 12, 27

Currencies

  • CMA arrangement, 86

  • Euro, 63

  • lilangeni, 69, 85t, 86n 17

  • loti, 69, 85t

  • Namibian dollar, 69

  • rand, 50, 69, 85t, 86n 17, 87

  • See also Optimum currency areas

Currency unions, 8, 28, 63

  • membership, 15

D

Debrun, Masson, and Pattillo (DMP) model, 64

  • focus and architecture, 67–68

  • general description, 88–89

  • inflation rates, 88

  • key variables and parameters, 88

  • as model-based assessment of CMA, 73, 75, 83–84

  • national policymaking, 88

  • supranational monetary policy, 88

Debrun, X., 55, 64, 66

Debt

  • ceiling, 59–60

  • government, 74f

Deficit bias, 58f

Deflation, 26

Demographics, 104, 105f

Destination principle, 26, 37, 43, 46

Dickey-Fuller test, 111

Direction of Trade Statistics (DOTS), 13, 14, 16t–18t

DMP. See Debrun, Masson, and Pattillo (DMP) model

DOTS. See Direction of Trade Statistics

Durbin-Watson statistics, 111, 112t

E

East African Community (EAC), 14

  • export diversion, 15

  • import diversion, 23

  • trade expansion, 15

Economic Community of West African States (ECOWAS), 14

  • export diversion, 15

  • trade creation, 24

  • trade expansion, 15

Economic convergence, 69–73

Economic crisis of 2008, 47

Economic diversification, 110

Economic growth, 110

Economic indicators, 71t, 79t, 80t

Economic union, 43, 45

ECOWAS. See Economic Community of West African States

Education, 102, 102n 13, 107

Efficiency wage theory, 91, 95, 95n 5

Employment, 91, 96f, 97, 98t, 99t

Employment-output elasticity, 97, 98t, 99t

Endogeneity, 13, 24–25, 37, 66, 66n 6

Estimated panel regressions, 111t

EU. See European Union

Euro, 63

Euro area, 61–62

European Union (EU), 14

  • members, 44

  • structural funds, 43–44

Ex ante studies, 7

Expenditures

  • growth, 57t

  • medium-term expenditure frameworks, 58–59, 61

  • rules, 61t

Exports

  • BLNS, 8–9, 10f, 11f

  • CEMAC diversion, 15

  • COMESA diversion, 15

  • EAC diversion, 15

  • ECOWAS diversion, 15

  • WAEMU diversion, 15

  • See also Bilateral exports data

Ex post studies, 7

F

Final use of imported goods, 43–46

Fiscal balance

  • CMA, 74f

  • expenditure rules compared with, 61t

  • for SACU, 4

Fiscal consolidation plan, 62

Fiscal frontiers, 1

Fiscal policy design

  • account balance response, 53f

  • appropriate rules, 54–56

  • call for, 49–50

  • conclusion, 62

  • consolidation plan, 62

  • GDP response, 52f

  • general options for, 60

  • numerical rules, 56, 59–62, 60t

  • options in BLNS, 50–54

  • overview, 47–49

  • ownership and enforcement, 62

  • procedural rules, 56–59

  • response to revenue loss, 49–54

  • revenue-sharing formula redefined, 56

Fiscal rules

  • appropriate for policy, 54–56

  • implementation, 55

  • rationale, benefits, costs, 55

Foreign exchange, 87

G

GDP. See Gross domestic product

General equilibrium model, 50

Golden rule, 61

Government consumption, 51

Government intervention, 110

Government investment, 51–52

Government spending, 108f

Gravity model of trade, 7, 8, 28

  • methodology and estimation issues, 12–13

Gross domestic product (GDP)

  • CMA and, 3

  • country shares and, 81

  • response to fiscal policy design, 52f

  • revenues based on, 48

  • SACU and, 35, 91

  • SADC, 36f

  • sustained growth, 109

H

Hegemony, 81, 83

HIV/AIDS, 104

Hodrick-Prescott filter, 41, 42f, 108–9

I

Imports

  • BLNS, 8–9, 10f, 11f

  • EAC diversion, 23

  • final use of imported goods, 43–46

  • See also Bilateral imports data

Income inequality, 107–10, 112t

Inflation, 72f, 88

Insider-outsider phenomenon, 91–92

Instrumental variable technique, 27

J

Jobs

  • creation, 110

  • quality in sub-Saharan Africa, 95

  • See also Employment; Southern African Customs Union, unemployment; Wages

K

Kalman filter, 108–9, 112t

Korea, 104–5

L

Labor

  • labor force, 95–96

  • mobility, 65

  • tax rate, 51

Labor markets, 91

  • diversity, 110

  • outcomes, 97–98, 100f–101f

  • regulations, 103–4

  • structure, 93–94

Lesotho, Namibia, Swaziland (LNS), 69–70

  • budget, 76

  • fiscal position, 73

  • prudential regulations, 87

  • reserves, 71

  • terms-of-trade shocks, 75, 77–78

Lilangeni, 69, 85t, 86n 17

Literature review, CMA, 65–67

LNS. See Lesotho, Namibia, Swaziland

Loti, 69, 85t

M

Macroeconomic stability, 66

Masson, P. R., 64, 66

Medium-term expenditure frameworks (MTEFs), 58–59, 61. See also Expenditures

MERCOSUR. See Southern Common Market

Minimum wages, 91

Model-based assessments

  • CMA welfare effects, 73–81, 76t, 77t, 79t, 80t

  • DMP model, 73, 75, 83–84

Monetary arrangements, 12

Monetary externalities, 66

MTEFs. See Medium-term expenditure frameworks

N

NAFTA. See North American Free Trade Agreement

Namibian dollar, 69

National policymaking, 88

Natural trading partners, 13

Nonlinearities, 27

North American Free Trade Agreement (NAFTA), 8, 14

Numerical rules, 56, 59–62, 60t

O

OCA. See Optimum currency areas

Omitted variables, 27

Optimum currency areas (OCA), 63–64

  • arguments for, 78

  • formation, 66

P

Pattillo, C., 64, 66

Phillips-curve shocks, 67–68, 88

Phillips-Perron statistics, 111

Policies

  • countercyclical fiscal policy, 40, 43

  • implications for unemployment, 110

  • national policymaking, 88

  • supranational monetary, 88

  • wage, 97–98, 100f–101f

  • See also Fiscal policy design

  • Preferential trade agreements, 7, 8

  • Procedural rules, 56–59

  • Procyclicality, 40, 47, 49, 61

  • Public wage bill, 47, 48f, 108f

R

Rand, 50, 69, 85t, 86n 17, 87

Rand Monetary Area (RMA), 69

Regional trade agreements (RTAs), 8, 12–13

  • assessing, 15

  • expanding trade, 23

  • trade effects, 22t

  • variables, 14

Reserve adequacy ratios, 73t

Revenues

  • BLNS from SACU, 36f, 38t, 39

  • collection, 47

  • fiscal policy design as response to loss, 49–54

  • GDP base, 48

  • SACU decline, 49–50, 50t

  • SACU sharing, 3, 25, 37

  • See also Southern African Customs Union, mitigating revenue volatility

RMA. See Rand Monetary Area

RTAs. See Regional trade agreements

S

SACU. See Southern African Customs Union

SADC. See Southern African Development Community

SARB. See South African Reserve Bank

Selection bias, 12, 24, 27, 39

Skill level demand, 102

Skill level supply, 102, 102n 12

Skills mismatch, 99, 101–2

South African Reserve Bank (SARB), 68, 86

  • leadership role, 75, 78

Southern African Customs Union (SACU), 2f

  • agreement, 38

  • assessing, 15

  • benefits, 1–3

  • challenges to, 3–4

  • CMA and, 5, 41

  • criticisms, 7

  • current revenue sharing, 37

  • economic crisis of 2008, 47

  • fiscal balance for, 4

  • future opportunities, 4–5

  • GDP and, 35, 91

  • implementation of value added tax, 4

  • lower revenues from, 48

  • members, 1

  • numerical rule, 56

  • over- and underpayments, 3

  • procedural rule, 56

  • reform of, 25–26

  • regional fiscal council, 62

  • revenue and grants to BLNS, 36f, 38t, 39

  • revenue decline, 49–50, 50t

  • revenue sharing, 3, 25

  • tariffs, 9, 11t

  • trade creation, 23–25, 24f

  • trade patterns, 9

  • trade promotion, 8–9

  • underemployment, 4

Southern African Customs Union, mitigating revenue volatility

  • collective approach, 40–43, 42f, 45

  • conclusions, 45–46

  • economic union and, 43, 45

  • final use of imported goods and, 43–46

  • overview, 35–37

  • from T + 2 adjustment mechanism, 38–40, 45, 48

Southern African Customs Union, unemployment, 92f

  • agricultural employment, 96f

  • conclusions, 110

  • cross country rates, 94f

  • data, 92–96, 95f

  • demographics in, 104, 105f

  • employment-output elasticity, 97, 98t, 99t

  • estimated panel regressions, 111t

  • government spending and wage bill, 108f

  • income inequality and, 107–10, 112t

  • insider-outsider phenomenon, 91–92

  • labor force and, 95–96

  • labor market regulations and, 103–4

  • long and short term, 107–8

  • overview, 91–92

  • policy implications, 110

  • skills mismatch and, 99, 101–2

  • summary of results, 104–7

  • tax rates and, 106, 106f

  • union density and, 98–99, 111

  • wage policy and labor market outcomes, 97–98, 100f–101f

  • welfare benefits and, 103

  • youth unemployment, 93

Southern African Development Community (SADC), 14

  • CMA expansion, 81

  • GDP and, 36f

  • job creation, 110

  • larger currency union, 83

  • members, 64–65

  • selected indicators, 79t

  • trade creation, 23

  • trade expansion, 15

Southern Common Market (MERCOSUR), 14

Sovereign wealth funds (SWFs), 51, 54

Sub-Saharan Africa (SSA), 92–94, 110

  • job quality, 95

  • Supranational monetary policy, 88

  • SWFs. See Sovereign wealth funds

T

T + 2 adjustment mechanism, 38–40, 45, 48

Tariffs, 9, 11t

Tax rates, 106, 106f

  • consumption, 51

  • labor, 51

  • value added, 4, 47

Terms-of-trade shocks, 75, 77–78

Trade

  • agreements, 15

  • BLNS data, 13–14

  • BLNS links, 23

  • Canada-U.S. Free Trade Agreement, 8

  • Direction of Trade Statistics, 13, 14, 16t–18t

  • integration, 2

  • NAFTA, 8, 14

  • natural trading partners, 13

  • preferential trade agreements, 7, 8

  • SACU patterns, 9

  • SACU promotion, 8–9

  • tariffs, 9, 11t

  • terms-of-trade shocks, 75, 77–78

  • UN Comtrade database, 19t–21t, 23

  • World Trade Organization (WTO), 14

  • zero-trade observations, 26–27

  • See also Bilateral exports data; Bilateral imports data; Bilateral trade; Exports; Gravity model of trade; Imports; Regional trade agreements

Trade creation

  • COMESA, 23

  • ECOWAS, 24

  • measuring, 28–29

  • SACU, 23–25, 24f

  • SADC, 23

  • WAEMU, 23

Trade diversion, 15, 23

  • measuring, 28–29

Trade expansion, 13, 15

  • measuring, 28–29

Treasury bills, 69, 72f

U

UN Comtrade database, 19t–21t, 23

Unemployment. See Southern African Customs Union, unemployment

Unions, 91

  • union density, 98–99, 111

  • See also Currency unions; specific unions

V

Value added tax (VAT), 47

  • SACU implementing, 4

VAT. See Value added tax

W

WAEMU. See West African Economic and Monetary Union

Wages

  • efficiency wage theory, 91, 95, 95n 5

  • freezes, 47

  • minimum, 91

  • policy, 97–98, 100f–101f

  • Public wage bill, 47, 48f, 108f

Welfare benefits, 103

West African Economic and Monetary Union (WAEMU), 14

  • export diversion, 15

  • trade creation, 23

  • trade expansion, 15

Y

Youth unemployment, 93

Z

Zero-trade observations, 26–27

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