ABSTRACT This study aims to investigate the state‐dependent interactions between business and financial cycles, challenging the linear assumptions prevalent in existing literature and arguing that these relationships are fundamentally regime‐contingent. We employ a dual Markov‐switching regression (MSR) framework to estimate two distinct models: one for the business cycle (output gap) and another for the financial cycle (private sector credit). This approach allows for the identification of distinct economic and financial regimes and an analysis of how drivers shift between them. Our results reveal an asymmetry. We identify distinct ‘expansion’ and ‘recession’ regimes for the real economy and ‘credit boom’ and ‘credit crunch’ regimes for finance. Crucially, credit contractions are significantly more persistent than expansions, and the fundamental drivers of each cycle shift dramatically across regimes, and in some cases decouple. We also document frequent desynchronization between cycles, signalling underlying vulnerabilities. The findings necessitate a paradigm shift towards pre‐emptive, state‐contingent and frequency‐aware policy framework. For Morocco and similar emerging markets, this means macroprudential tools must be deployed aggressively during booms, while targeted interventions, rather than conventional monetary policy alone, are required to address persistent credit crunches. This research provides a template for policy design in economies navigating the complex interplay of financial integration and external volatility.
ABSTRACT While local‐currency bond markets have become a dominant source of emerging‐market financing and an integral component of the global financial system, market‐observed measures of sovereign default risk are still based on foreign‐currency denominated debt. This paper assesses the Du–Schreger credit risk spread on local‐currency debt for South Africa for the period between January 2008 and October 2022, and shows that it is a good measure of local‐currency credit risk for South Africa, in that it reflects developments in domestic sovereign risk while being less responsive to external developments than measures based on foreign‐currency denominated debt. The credit spread is then used to examine the role of sovereign and exchange rate risk as drivers of changes in nominal bond yields. For the review period, global factors, particularly the US dollar, are shown to be significant drivers of changes in nominal yields relative to domestic factors, while sovereign risk became less significant over time.
ABSTRACT This paper synthesizes causal evidence on the transition from traditional biomass to improved cookstoves and modern fuels like LPG and electricity. Although literature identifies liquidity, gender and information as primary barriers to adoption, uncertainty remains regarding usage intensity and technological persistence. To address this welfare wedge, we propose a Clean Energy 2.0 research agenda centred on six critical frontiers: (i) financial innovations like Pay‐As‐You‐Go models and labour‐linked transfers; (ii) the objective measurement gap between self‐reports and sensor data; (iii) increased methodological rigour and statistical power in randomized trials; (iv) the geographic imbalance favouring rural studies over urban charcoal hotspots; (v) a broader welfare lens encompassing general equilibrium effects on household time‐use and agency; and (vi) the neglected energy behaviour of micro and small enterprises. We argue that accounting for the production sector is essential to prevent market leakage, where household‐level gains are neutralized by industrial biomass consumption, decoupling productivity from environmental degradation.
ABSTRACT South Africa enjoys access to reliable data on mathematics skills among youths, skills which are vital for postschool opportunities and national development. But the data are underutilised and the available research could be communicated better. This article discusses several perceptions not supported by evidence. It presents new evidence confirming two things. Firstly, despite improvements in the schooling system, the supply of mathematics skills is still below present levels of university demand. Secondly, the supply of good mathematics skills is better in rural than urban parts of the country, which is counterintuitive and important for planning expansion to this supply.
Health technology assessment (HTA) in South Africa operates in the absence of formal, nationally adopted health economic guidelines, creating challenges for consistent and transparent healthcare funding decisions. While international frameworks provide useful reference points, their direct application may be inappropriate in a highly unequal, resource-constrained setting characterised by a dual public-private healthcare system. This paper proposes a structured decision-support framework for health technology funding decisions in South Africa that integrates international best practices with contextual considerations relevant to the local health system. The framework addresses three key limitations of conventional cost-effectiveness approaches: the subjectivity inherent in quality-adjusted life year (QALY) measurement, the limited consideration of affordability and budget constraints, and the incomplete inclusion of treatment pathway costs. A normative reference-case multi-criteria decision analysis (MCDA) framework was developed through a structured four-stage process involving a targeted review of international HTA and MCDA frameworks, contextual adaptation to the South African setting, and the identification, grouping, and weighting of decision criteria using explicit normative judgement. The resulting framework incorporates clinical effectiveness, disease burden and severity, equity and fairness, budget impact, societal acceptance, innovation, and cost-effectiveness within a transparent decision-making structure. An illustrative application using advanced non-small cell lung cancer demonstrates how funding recommendations may differ when broader value considerations are incorporated alongside conventional incremental cost-effectiveness ratio (ICER) estimates. The framework makes explicit the value judgements that underpin healthcare funding decisions and provides a transparent reference case for examining the implications of alternative weighting assumptions through scenario and sensitivity analyses. While not intended as a prescriptive national guideline, the framework offers a practical foundation for structured, context-sensitive decision-making and contributes to ongoing discussions regarding equitable priority setting in South Africa and other upper-middle-income countries facing similar health system constraints.
In countries where access to formal financial institutions is limited, a likely consequence is a lack of start-up capital, which constrains otherwise promising ventures. In this paper, we ask (1) whether recent technological improvements in the financial industry, mainly crowdfunding finance, assist individuals facing financial constraints to enhance/embark on entrepreneurial ventures. To address this endogenous question, we hypothesize that distrust in formal banking institutions by individuals engaged in entrepreneurial ventures and the advancements in Information and Communication Technology (ICT) infrastructure plausibly drive the demand for an alternative financing model--that is, crowdfunding. Using distrust and ICT to instrument crowdfunding, we find a significant positive association with entrepreneurship. Next, we ask (2) whether crowdfunding complements or substitutes access to formal banking services, and what their joint effect is on entrepreneurship. Interestingly, the findings reveal an inverse relationship between crowdfunding and limited access to banking services, indicating a substitution effect. Even more, their joint effect underscores an alternative financing path positively associated with entrepreneurship. Finally, we reflect on the contributions and practical implications of these findings aligned with alternative finance, financial inclusion and private sector development in the context of developing countries.
ABSTRACT This paper provides a simple method for an African country to identify the markets (countries) and products where it is most likely to be able to increase exports to the rest of Africa under AfCFTA. Given concerns with the effects of climate change in Africa, the method can also provide estimates of the increase in CO 2 emissions (that contribute to increasing temperatures) associated with these exports. The only data requirements are current tariffs and export values, with assumptions about import demand elasticities and emissions intensity. The method is restricted to growth of existing exports as this indicates that the country already has export capacity in markets already importing their products and that these products are unlikely to be excluded from liberalisation by importing countries. Application of the method is illustrated with estimates of the potential for East African Community (EAC) member countries to increase exports to other African countries. Results suggest that the EAC could expand exports overall by 10%–15%, largely concentrated in relatively close countries and in agriculture and resource‐based products plus basic manufactures. The implied CO 2 elasticity to exports is below unity for Burundi and Kenya, but above unity for Rwanda, Tanzania and Uganda; in all cases, there is a negligible increase in total emissions associated with trade. African countries can anticipate moderate intra‐regional export gains from AfCFTA and, by identifying the markets and products most likely to be affected, the method provides a guide to policymakers on where to target support for exports while minimising any increase in CO 2 emissions.
ABSTRACT The study explores the effect of digitalisation on corruption and on human development in Sub‐Sahara Africa (SSA) and its subregions. The fixed effects and Hausman–Taylor techniques and data for 33 SSA countries are used. We find that digitalisation has a nonlinear effect on corruption and on human development. The effect of digitalisation on corruption is insignificant across the subregions. Subregions (Middle and Southern Africa) with higher digitalisation levels recorded a bigger level of human development compared to East and West Africa. Furthermore, there is no significant effect of digitalisation on human development in the presence of corruption, but overall, digitalisation enhances human development in SSA. In Middle and Southern Africa (with high digitalisation), digitalisation increases human development in the presence of corruption; the opposite is reported for East and West Africa with lower levels of digitalisation. This is important for policy implication as digitalisation in SSA seems to be less than enough to fully exploit its potential.
This study pursues a dual inquiry. First, it investigates the unconditional effect of industrialization on Africa's economic resilience. Second, it examines the role of infrastructure in moderating the effect of industrialization on economic resilience in Africa. In this study, economic resilience is defined by macroeconomic stability, market efficiency and governance. The analysis utilizes a sample of 45 African countries from 2005 to 2023. The fixed effects (FE) regression model is used as the baseline to control for unobserved heterogeneity, while the system generalized method of moments (SYS-GMM) estimator is employed to address potential endogeneity, unobserved heterogeneity (omitted variable bias) and reverse causality in dynamic panel data settings. To broaden the scope for policy relevance, industrialization is analysed through two key components: industrial value added (% GDP) and manufacturing value added (% GDP). The finding reveals that at certain statistically significant thresholds, some infrastructural dynamics emerge as critical moderators that African economies can leverage to enhance industrialization efforts and strengthen economic resilience. The corresponding policy recommendations align with discussions around the African Continental Free Trade Area (AfCFTA) and the African Union's Agenda 2063, emphasizing two key priorities: first, strategically investing in sectors with high industrial potential across the continent; and second, strengthening public-private partnerships (PPPs) to foster inclusive, resilient and sustainable regional economic development.
Research on fiscal multipliers in sub-Saharan Africa is a largely unexplored topic, with few country-specific studies. Consequently, it has typically been assumed that the region has low fiscal multipliers, based on evidence from other developing countries rather than direct empirical analysis. This paper aims to address this literature gap, by estimating and analysing the cumulative fiscal multipliers for government consumption and government investment in Ghana, using quarterly data from 2006Q1 to 2025Q4. The local projections methodology is employed. Results show that the economy of Ghana is responsive to fiscal stimuli: The 1-year multiplier for government consumption is 0.89, remaining relatively stable at 0.84 over a 2-year horizon. In contrast, the multiplier for government investment is never significant, a difference largely attributable to a higher import content of investments. However, when isolating the domestically financed component of public investment, we find evidence of a significant medium-term effect: The multiplier is 0.73 (non-significant) at the 1-year horizon, rising to 1.79 after 2 years.
Most inflation-targeting frameworks allow for a positive trend inflation rate, yet its optimal level remains uncertain. The extended deliberation in South Africa to move from a 3%-6% target band to a 3% target (with a 1% tolerance band) illustrates this tension. Using a medium-scale New Keynesian DSGE model with nominal price rigidities and fiscal dynamics, this paper shows that even moderate trend inflation causes significant resource misallocation through price dispersion, flattens the Phillips curve and raises welfare losses and sacrifice ratios. Omitting trend inflation in a Taylor-rule framework overstates policy inertia and understates the responsiveness needed to stabilise prices. Anchoring expectations closer to lower bound of the target band improves stability: lowering trend inflation from 6% to 3% reduces the sacrifice ratio by 0.67 percentage points.
This paper studies the effects of ethnic linkages on trade between countries within Africa. I construct a digitised and geo-referenced dataset of historical ethnic territories for pre-colonial Africa. The empirical strategy exploits the role of historical ethnic territories in shaping the current distribution of ethnic groups across countries to estimate the impact of potential ethnic networks on modern trade flows with an instrumental variable framework. The impact of ethnic links is quite strong, with trade increasing by nearly two-thirds between countries that share a common ethnic group. Non-linearities in the results support the effect being driven by a few ethnic groups creating powerful links between countries despite often being minority groups.
Monetary-fiscal policy tensions build-up when debt is rising and inflation is falling. We introduce the concept of a fiscal-neutral rate (fiscal r-star) into a two-agent new Keynesian dynamic stochastic general equilibrium model estimated with South African data. We show two persistent gaps: (i) Monetary r-star exceeds fiscal r-star, indicating a misalignment between monetary and fiscal policy, and (ii) market interest rates exceed fiscal r-star, implying that, without policy action, the risk premium on borrowing will continue to be a drag on growth and debt service costs are likely to crowd out other spending. Our model simulations show that the optimal welfare outcomes are achieved by taking steps to align fiscal r-star with monetary r-star, through introducing a credible fiscal anchor.
This study examines the dynamic relationship between crude oil prices and African stock markets, using daily data from 10 African stock markets for the period 2014-2024. Employing wavelet coherence analysis and MGARCH-DCC, it introduces a dynamic, comparative framework, improving upon static approaches. The study reveals generally weak correlations under normal conditions; however, significant co-movements emerge during crises like the COVID-19 pandemic, often driven largely by speculative hot money rather than fundamental economic linkages. The findings reveal substantial heterogeneity in how African stock markets respond to oil price changes, with oil-exporting economies experiencing heightened volatility linked to fiscal dependence on oil revenues, whereas oil-importing countries are more exposed to inflationary pressures.
This paper presents a quantitative bibliometric analysis of articles published in the South African Journal of Economics (SAJE) between 1980 and 2023. Using a purpose-built artificial intelligence-assisted dataset covering 1229 articles, the study examines changes in authorship characteristics, geographical affiliation, thematic focus and research methods over more than four decades. The analysis reveals increasing diversification in author origins, a growing regional African presence, rising collaboration and a marked shift toward quantitative methods, particularly since the 2000s. These trends reflect broader transformations in economics as a discipline and the evolving role of SAJE as a regionally grounded yet internationally engaged applied economics journal.
South Africa is one of the most unequal economies globally. In this paper, we examine the design of its personal income tax (PIT), with a focus on its redistributive function. We apply the Pf & auml;hler decomposition method to analyse the redistributive effects of key components of the South African PIT system, including the marginal tax rate schedule, the definition of gross taxable income and the provision of tax deductions and tax credits. Our findings highlight that the marginal tax rate schedule is the primary driver of redistribution, while tax expenditures often favour higher income individuals, resulting in adverse redistributive effects. Additionally, we assess how recent changes to the PIT schedule have influenced redistribution. Among others, we show that below-inflation adjustments of marginal tax thresholds reduced progressivity. We conclude by discussing policy options to enhance the redistributive capacity of South Africa's PIT system.
Although there is increasing interest in wealth as a measure of well-being, very few studies measure the wealth gap between men and women, and even fewer examine the gender wealth gap within couples. One of the main reasons for this is that data on wealth are collected at the household level in most surveys. In this paper, we examine wealth inequality within couples using individual-level data on assets and debts matched on spouses from the South African National Income Dynamics Survey of 2017. We find substantial intra-couple wealth inequality in South Africa, with women's share of total couple net worth 0.39 on average. We examine a range of demographic, labour market and household correlates of intra-couple wealth gaps and find that the stronger the woman's relative position in the couple with respect to age, education, financial literacy, income and employment status, the higher her share of couple wealth. In contrast, children in the household are associated with lower relative wealth for the woman in the couple. We reflect on the implications of our findings for women's well-being and suggest possible avenues for future research and data collection.
The concept of creative destruction emphasizes how the turnover of businesses and workers drives innovation, productivity gains and aggregate economic growth, even as individual firms and employees experience disruption. This article leverages administrative tax data for South Africa that measures flows rather than stocks, enabling a dynamic analysis of labour and firm adjustments. Our findings reveal unexpectedly high levels of churn in both jobs and business establishments, suggesting fluid rather than rigid markets. However, job and business creation mirror destruction, resulting in low net growth. Moreover, sectoral shifts over time have not increased the share of tradables, implying that structural transformation has stalled.
Several significant urban transportation projects implemented in South Africa over the last decade have had disappointing results at odds with ex-ante and ex-post economic appraisals of their feasibility. The economic and financial implications are significant and enduring and, in the case of the bus rapid transit (BRT) systems, have resulted in criticism of their value for money proposition. A key input into the economic appraisal of transport schemes is the value of travel time (VTT), which is based on micro-economic theory of time allocation and derived from users' willingness to pay for travel time savings. This paper contends that the correct valuation of VTT benefits has been under-researched in South Africa. We review historical values of non-work–related travel time and compare these with values derived from two types of discrete choice models estimated from a consolidated stated preference dataset from Tshwane, Johannesburg and Ekurhuleni in Gauteng Province, South Africa. An elasticity analysis highlights that the key BRT demand sensitivities are the number of transfers, fare levels and travel time. A mean value of non-work–related travel time of R13.89/h (currently US$0.80/h) confirms that public transport commuters in South Africa have lower VTTs than previously assumed. These findings are contrary to the characteristics of the BRT systems that have been implemented, which emphasise faster travel times and higher fare levels. The analysis also highlights the significant heterogeneity in VTT across the population because of a combination of taste, mode and income effects. These findings have important implications for public transport system designs and operations, which should emphasise reliable services, minimising transfers and lower fares.
This study examines productivity growth and convergence dynamics among 24 firms listed on the Ghana Stock Exchange (GSE) from 2012 to 2022, exploring how managerial efficiency, corporate financing decisions and technological adoption shape these patterns. Using a sample period marked by significant structural and regulatory reforms in Ghana's capital market, the analysis integrates the generalized method of moments (GMM) with the Malmquist Productivity Index (MPI) to provide robust evidence on the drivers of productivity change and the extent of convergence across firms. The findings reveal a substantial annual convergence rate of approximately 41.6%, indicating meaningful reductions in productivity gaps among listed firms. Complementary sigma-convergence analysis shows a gradual narrowing of productivity dispersion over time, albeit with intermittent periods of widening linked to market-level shocks. The results further uncover three distinct productivity clusters, with one cluster exhibiting divergence, highlighting structural and firm-specific constraints that inhibit catch-up processes. Decomposition analysis indicates that learning effects, driven by managerial efficiency and operational improvements, constitute the primary source of productivity growth. However, persistent inflationary pressures and limited technological diffusion continue to hinder firm-level convergence, underscoring the market-specific challenges facing Ghana's emerging capital environment. This study contributes to the literature by elucidating how firm-specific strategies and macroeconomic conditions shape convergence in an emerging African stock market. It offers insights for policymakers and business leaders to enhance productivity, foster inclusion and strengthen the resilience of Ghana's stock market.
