School of Public Leadership

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Browsing School of Public Leadership by browse.metadata.advisor "Adjasi, Charles Komla"

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    Essays on finance and international trade in Sub-Saharan Africa
    (Stellenbosch : Stellenbosch University, 2018-12) Akoto, Richard Kofi; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. School of Public Leadership.
    ENGLISH SUMMARY : Access to finance has been noted as a vital ingredient in promoting international trade activities of firms. This thesis is a collection of three essays that investigate the effect of financial access on foreign trade activities in sub-Saharan Africa (SSA). Specifically, the study asks the empirical questions of whether access to external finance promotes the overseas market entry decision of firms and also enhances firms’ exports size. It also asks whether high levels of financial sector development can help spur commodity export diversification in SSA. The study solicits data from the World Bank and United Nations Conference on Trade and Development (UNCTAD) databases. The first essay examines the influence of external credit (bank credit and non-bank credit) on the likelihood of manufacturing firms to export in Nigeria. The findings show that access to both bank and non-bank credits positively and significantly drive the probability to export in Nigeria, suggesting that increased access to these sources of finance encourage more firms to internationalise in Nigeria. The second essay investigates the effect of external credit (bank credit and ‘suppliers and customer’ credit) on firms’ exports size in Nigeria. The findings here indicate that bank credit is exports-reducing while ‘suppliers and customer’ credit which is an alternative source of external credit to bank credit is positive and significantly drives exports size. This implies that while improved access to external credit is critical in enhancing firms’ exports size, exporters need to be mindful of the characteristics of such credit. The evidence thus far suggests that a relatively more flexible and affordable credit source with long-term repayment plan that meets exporters’ needs appears to be more exports-size promoting. The third essay determines how financial development affects commodity export diversification in SSA. The findings reveal a strong positive influence of financial development on commodity export diversification in SSA, suggesting that countries with high level of financial sector development may have more diversified export baskets. This study contributes to the extant literature in three unique ways. First, it shows that beyond bank credit, access to non-bank credit is also vital in overcoming the sunk and fixed costs of foreign market entry of Small and Medium-sized Enterprises (SMEs) in developing countries. Second, it expands the literature by showing that for an exporting SME to increase its exports size and remain buoyant in the market, structured finance in the form of ‘suppliers and customer’ credit is more important and serves the cause better than bank credit in developing economies. This is due to the flexibility in accessing ‘suppliers and customer’ credit coupled with the way it is designed to meet exporters’ needs relative to bank credit. Third, the study is also the first regional-level work that provides empirical insight into how financial development may affect export diversification in SSA and reveals that high financial sector development can help SSA countries diversify their export baskets.
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    Essays on finance, productivity, market participation and welfare : the case of smallholder agricultural farmers in Ghana
    (Stellenbosch : Stellenbosch University, 2018-12) Nordjo, Ralph Essem; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. School of Public Leadership.
    ENGLISH SUMMARY : Access to finance plays a significant role in transforming or modernising the agricultural sector from subsistence to commercial farming; however, access to finance remains a challenge to smallholder farmers, especially for those in developing countries. Although the literature points to some directions on the transmission of finance into the productivity and welfare of smallholder farmers, very few rigorous studies have been conducted to investigate the impact of access to finance on smallholder agricultural productivity and household welfare, particularly in Sub-Saharan Africa. This study, therefore, tested for the finance-productivity and finance-welfare links in Ghana using rigorous evaluation techniques that address the problems of endogeneity and selection bias. Additionally, the study examined the determinants of smallholder market access and market participation as well as the impact of integrated soil fertility management (ISFM) on productivity. Data for the study was obtained through a field survey on the Agricultural Value Chain Facility (AVCF) project implemented in the Northern Region of Ghana. The outcomes of the study are presented in four essays. In the first essay, we estimate the effect of access to finance on the productivity of smallholder maize farmers in the Northern Region of Ghana. We applied instrumental variable (IV) estimation techniques to control for selection and endogeneity bias. Our results indicate that access to finance increases maize productivity. The second essay estimates the effect of access to finance on smallholder farmers’ welfare. We compared the average difference in welfare between farmers with access to finance and non-equivalent control groups. By adopting propensity score matching (PSM) and propensity score weighting (PSW) to control for selection bias, the results of the econometric estimation indicate that access to finance has a positive and significant effect on the welfare of smallholder farmers. Financial sector policies must be focused not only on rural finance in general but must also be geared towards unlocking the challenges of agricultural financing at all levels. To this end, developing a comprehensive agricultural value-chain finance policy will play a cardinal role towards improving access to finance and improving the welfare of smallholder farmers. Agricultural policies must have significant financing subcomponents aimed at financing the agricultural value chain. In the third essay we assess the market access and market participation amongst smallholder farmers. Using the double-hurdle model, we found that there are significant differences in the effect of market factors (transactions and transportation costs) and production factors on market participation and the intensity of participation. These differences also exist across crop types. Policies and strategies for increasing market access and market participation must not be the same for all smallholder farmers. The fourth and final essay estimates the impact of the Integrated Soil Fertility Management (ISFM) training program under the Danish International Development Assistance (DANIDA) Agricultural Value Chain Facility (AVCF) project on the productivity of smallholder farmers. We used a survey data of beneficiary and non-beneficiary non-equivalent control groups to compare the mean productivity. The propensity score matching (PSM) method was deployed to estimate the impact of the ISFM program. The results indicate a statistically significant increase in the farm-level productivity of the crops. In view of this, a policy direction towards increasing agricultural productivity of smallholder farmers must take into consideration the ISFM practices. This study makes unique contributions to the literature in several ways. First, we show that finance in the form of production credit is crucial for smallholder farmers. For these farmers a critical challenge to productivity is the ability to access short to medium-term credit on a regular basis to finance the cost of inputs, market access issues and other operational costs. Access to finance helps to mitigate against the shocks and risks (real and perceived) associated with smallholder farming and which make commercial banks shy away from lending in this area. Second, we present evidence on the effect of finance on the welfare of smallholder farmer households, using the case of Ghana. Although the literature on finance and welfare specifies a production channel via which finance affects welfare, it fails to show how this occurs with empirical evidence. Therefore, to better understand the link between finance and welfare, it is important to empirically test this amongst smallholder finance. Third, we present new dimensions to the literature and show, in particular, that there is substantial separability between the decision to access the market and that of market participation by smallholder farmers. The decision to market access and market participation are therefore mostly two different issues for smallholder farmers and factors that affect these decisions can affect them separately and in different directions. Finally, this thesis presents further evidence on the productivity impact of soil fertility and crop management by assessing the impact of a relatively new practice, namely Integrated Soil Fertility Management (ISFM). This evidence strengthens the case for an integrated approach to crop management within ecological contexts.
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    Essays on foreign direct investment and firm economic activities in selected sub-Saharan African countries
    (Stellenbosch : Stellenbosch University, 2018-12) Nyeadi, Joseph Dery; Adjasi, Charles Komla; Stellenbosch University. Faculty of Economic and Management Sciences. School of Public Leadership.
    ENGLISH SUMMARY : In recent times, the attraction of foreign direct investment (FDI) into economies has been a major task embarked upon by many nations. Though much have been documented on the impact of foreign direct investment inflow to host nations at the macro level, less is known about the impact of foreign direct investment at the firm level, especially in Africa, despite the greater efforts put in place to woo in FDI. This study investigated the link between FDI and firm economic activities in Sub-Saharan Africa (SSA). The study specifically answered the following questions: (1) to what extent does FDI inflow to firms enhance the value of the host firms? (2) Do firms with FDI spend more on CSR than non-FDI owned firms? (3) What impact has FDI got on firm innovation? The outcome of the study has been organized into three empirical essays. The first empirical essay investigates the relationship between Foreign Direct Investment (FDI) and firm value (measured using Tobin’s Q and ROA) for selected African firms from Ghana, Nigeria and South Africa for the period of 2008 to 2012. Using the System Generalized Method of Moments, we established that FDI has a positive significant impact on firm value in all the three countries (South Africa, Nigeria and Ghana). This positive relationship between FDI and firm value in the selected countries can be attributed to technological transfer, managerial transfer, innovation transfer and skills transfer in favour of the host firms through inflows of FDI. The second essay investigates empirically the impact of inward FDI on host firm Corporate Social Responsibility (CSR) performance in South Africa. The study employs Panel Corrected Standard Errors (PCSE) and Seemingly Unrelated Regression (SUR) to estimate the effect of FDI on CSR and thus addresses contemporaneous cross-correlations across the panel cross sections as well as endogeneity between FDI and CSR. It is established from the study that FDI has a strong positive impact on firm CSR performance. When CSR is decomposed further into its major components, FDI positively impacts on social and environmental components but has no impact on governance components. The third empirical essay investigates the impact of inward FDI on host firm innovation in Nigeria and South Africa. In examining the relationship between FDI and firm innovation, two robust Instrumental Variable estimation techniques (Two Stage Least Squares and Limited Information Maximum Likelihood) have been employed so as to account for endogeneity problems. While FDI positively influences firm innovation in Nigeria, we found no evidence of any impact of FDI on firm innovation in South Africa. This study does not only serve as a reference work for subsequent investigations on the impact of FDI on innovation in Sub-Saharan Africa, but it also serves as a guide to policy makers on trade and investment policies. The contribution of this thesis is in a number of ways. One, it accounts for endogeneity between FDI and firm value and FDI and innovation, an issue often neglected by most studies. It is also the first study to empirically examine the relationship between FDI and CSR in a more encompassing manner by using a unique and comprehensive measure of CSR from the Public Investment Corporation (PIC) Governance Survey in South Africa. Again, unlike previous studies where CSR is measured by using only governance, or only legal or only environmental or only philanthropic issues or the combination of them in a limited manner. In this way new evidence is presented on the FDI effect on CSR. For instance, although the effect of FDI on one dimension of CSR e.g. governance may be insignificant, it does not tell us anything about the importance of social and environmental CSR effects of FDI unless these are equally investigated. The study again presents new evidence that shows that context matters in investigating the innovation impact of FDI. Furthermore, unlike most studies which use R&D and patents to measure innovation we create an innovation index using a multiple correspondent analysis (MCA) approach which captures innovation holistically. This approach captures the time lag problems associated with previous methods.
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    Essays on sectoral inflation persistence and threshold differentials in Ghana
    (Stellenbosch : Stellenbosch University, 2018-12) Oduro-Afriyie, Emmanuel; Adjasi, Charles Komla; Ikhide, Sylvanus; Stellenbosch University. Faculty of Economic and Management Sciences. School of Public Leadership.
    ENGLISH SUMMARY : This study empirically identifies various sector-specific threshold inflation levels in Ghana with annual and monthly data covering the period 1960 to 2017. The results of the assessment have been compiled into four essays. The first essay reviews Ghana’s inflationary history from pre-independence to the current era and assesses the myriad of historical monetary policy frameworks and inflation management tools employed by successive political regimes. Average inflation of 31% was recorded during the monetary targeting regime up to 1991 where credit controls were instituted. Over the next decade, with the adoption of open market operations (OMO), average inflation dropped to 28%. Similarly, prior to the formal adoption of inflation targeting (IT) in 2007, average inflation further declined to 15% between 2002 and 2006. Since the formal adoption of IT, a one percentage point drop in average inflation to 14% was recorded. Overall, a consistent decline in average inflation has been witnessed across the different policy frameworks. Decadal and 5-year analyses of Ghana’s inflation since 1960 also confirm the overall downward trend of Ghana’s inflation to the present day. Since 2012, a burgeoning of a creeping inflationary spiral is evident. Recently, from 2014 the economy ushered in a new spell of moderate inflation with average annual inflation being 16%. We identify Ghana’s foremost macroeconomic problem as inflation persistence. The second essay tests for the presence of threshold effects in Ghana’s headline inflation. It uses Regime Switching Threshold Autoregressive and Smooth Transition Regression Models to identify inflation thresholds and their effects on output growth. The findings suggest threshold effects exist within Ghana’s inflation, with the estimated threshold at 11%. Expected switching probabilities of inflationary regimes are also estimated. We find a 97% chance of a high inflation regime succeeding a low inflationary period and a 3% chance of a low inflation period succeeding a low inflation period. There exists a 94% likelihood of succession from one high inflationary period to another and a 6% chance of transition from a high inflation era to a low one. While the Ghanaian economy can remain in a continuously low inflation era for no more than one year, it will take approximately 37 years to exit any high inflation spell it enters. This essay particularly makes a contribution by adding to the very scanty threshold inflation non-linearity literature on Ghana The third essay examines Inflation Persistence (IP) in Ghana. In doing so it employs Stock’s (1991) 95% confidence interval for the largest root of the autoregression and identifies a reduction in inflation persistence during low and stable inflationary episodes in Ghana, as well as an increase in persistence during higher levels of inflation. We adopt the Dornbusch-Fisher (1993) framework to the case of Ghana in mapping out moderate persistent spells of inflation between 1960 and 2015. We find evidence of a reduction in inflation persistence after the introduction of the Structural Adjustment Program (SAP) of the 1980s. Moreover, the Central Bank’s formal adoption of the inflation targeting framework in 2007 similarly led to a fall in inflation persistence across the aggregate economy. At the sectoral level, Ghana’s food sector is the most affected by IP. We empirically examine the effectiveness of historical policy interventions on aggregate and sectoral IP and find dwindling levels of effectiveness over time. Lastly we compare Ghana’s inflation persistence with other economies and conclude that in pursuing single digit inflation, policy makers should continuously monitor inflation persistence. Based on its findings, this essay also contributes to literature by taking a first pass on which strand of the inflation-growth non-linearity literature that sectoral inflation data subscribes to. The fourth essay tests for the presence of inflation inertia and threshold effects in sectoral inflation in Ghana. It uses Regime Switching Threshold Autoregressive and Smooth Transition Regression Models to identify thresholds and also the effect of sectoral inflation on sectoral output growth. The findings suggest that threshold effects exist within Ghana’s sectoral inflation, with estimated thresholds of 11.5%-15.2% and 13% for the food and non-food sectors respectively. In the food sector, while no threshold is identified for the dry season, a markedly differing threshold of 6.1% is identified for the rainy season as general food prices in Ghana drop during periods of sustained rainfall. Inflationary expectations (inertia) are evident in the non-food sector and serve as a key determinant of non-food output growth in Ghana. Using Markov Switching models, expected durations and expected switching probabilities of inflationary regimes are also estimated. This paper contributes to literature by pioneering the probe of threshold inflation non-linearity at the sectoral level of an economy. The combined evidence in this thesis quite strongly indicates the failure of Ghana’s current inflation targeting framework in catering for sectorial differences within the economy. Clearly, inflation targets are seldom met, and persistence in inflation is increasing to pre policy implementation levels at both the aggregate economy and the food and non-food sectors. The output potential of Ghana’s sectors as well as the long term success of the inflation targeting framework is therefore in jeopardy if urgent interventions are not effectively implemented.