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Ms. Tabova is an Economist in the Division of International Finance at the Board of Governors of the Federal Reserve System. This paper was initiated when Ms. Tabova was a summer intern in the IMF‘s African Department. The views in this Working Paper should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. Both authors would like to thank Sharmini Coorey, Bernardin Akitoby, Andrew Berg, Cathy Pattillo and participants in various seminars for their helpful comments and suggestions. Any errors and omissions, however, should be attributed only to the authors. This paper will also comprise a chapter of a forthcoming book on the CEMAC region.
The group of low-income countries includes: Benin, Burkina Faso, Central African Republic, Guinea-Bissau, Mali, Niger, Senegal, Togo, Burundi, Comoros, Ethiopia, Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mauritania, Mozambique, Rwanda, Sierra Leone, Tanzania, Uganda, Zambia, Bangladesh, Cambodia, Lao P.D.R., Vietnam, Tajikistan, Uzbekistan, and Haiti. The group of CFA oil exporters includes: Cameroon, Chad, Congo (Republic of), Cote d’Ivoire, and Gabon.
The facilitating role of the exchange rate refers to the fact that keeping the exchange rate competitive and avoiding excess volatility facilitates the growth-enhancing potential of the fundamentals. Eichengreen (2008) provides a detailed discussion of the link between the real exchange rate and growth, as well as the potential and limitations of policy interventions.
Straub (2008) surveys 64 articles in refereed journals in the period 1990–2007. While two-thirds of the empirical studies find a positive and significant association between infrastructure investment and growth, certain questions regarding policy implications (such as the optimal spending levels at different stages of development, impact of infrastructure investment on development gaps in different regions within countries, or between urban and rural areas) have been more difficult to answer.
We do not estimate the direct impact of market weaknesses on growth since as the theoretical model above shows, these will manifest themselves through the effectiveness of investment in spurring growth.
See, for example, Klenow and Rodriguez-Clare’s (1997) analysis of the neoclassical growth model, in which they measure capital stocks by accumulating investment data in the Penn World Tables.
The group of CFA oil exporters includes: Cameroon, Chad, Congo (Republic of), Cote d’Ivoire, and Gabon. The group of CFA non-oil exporters includes: Benin, Burkina Faso, Central African Republic, Guinea-Bissau, Mali, Niger, Senegal, and Togo. The group of low-income countries (LICs) includes: Burundi, Comoros, Ethiopia, Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mauritania, Mozambique, Rwanda, Sierra Leone, Tanzania, Uganda, Zambia, Bangladesh, Cambodia, Lao P.D.R., Vietnam, Tajikistan, Uzbekistan, and Haiti.
Public investment is gross public fixed capital formation as a share of total GDP; private investment is gross private fixed capital formation as a share of total GDP. During the estimation period, private investment in the CFA oil exporting countries was mainly in the oil sector, while public investment was in infrastructure.