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Africa's macroeconomic story

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  • Hostland, Douglas
  • Giugale, Marcelo M.
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    Abstract

    Much of Sub-Saharan Africa's post-independence macroeconomic history has been characterized by boom-bust cycles. Growth accelerations have been common, but short lived. Weak policy formulation and implementation led to large external and fiscal imbalances, excessive debt accumulation, volatile inflation, and sharp exchange rate fluctuations. This characterization changed, however, in the mid-1990s, when debt relief and better macroeconomic policy began to provide a source of stability that has helped sustain robust growth throughout much of the region. In resource rich countries, the process was supported over the past few years by a dramatic increase in commodity prices. But resources are only one part of the story. Growth has exhibited impressive resilience even in the face of negative external shocks, as in 2008-2009. While the short-term outlook remains positive, over the medium term policy makers face new challenges. Several countries have the potential to greatly expand natural resource production and become major commodity exporters; volatile resource revenue will complicate their fiscal and monetary planning. Rising investor appetite for financial assets of frontier markets and the development of domestic debt markets will continue to broaden the menu of and trade-offs among financing options at a time when global interest rates may start sloping upward. Complex financing arrangements -- notably for private-public or public-public partnerships in infrastructure -- will become more common and will generate new types of fiscal commitments and contingencies.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6635.

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    Date of creation: 01 Oct 2013
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    Handle: RePEc:wbk:wbrwps:6635

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    Related research

    Keywords: Debt Markets; Currencies and Exchange Rates; Emerging Markets; Economic Theory&Research; Environmental Economics&Policies;

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    1. International Monetary Fund, 2009. "Spillovers From the Rest of the World Into Sub-Saharan African Countries," IMF Working Papers 09/155, International Monetary Fund.
    2. Cavalcanti, Tiago V. de V. & Mohaddes, Kamiar & Raissi, Mehdi, 2011. "Growth, development and natural resources: New evidence using a heterogeneous panel analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 305-318.
    3. Rabah Arezki & Frederick van der Ploeg, 2008. "Can The Natural Resource Curse Be Turned Into A Blessing? The Role of Trade Policies and Institutions," OxCarre Working Papers 001, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    4. Andrew Berg & Rafael Portillo & Shu-Chun S. Yang & Luis-Felipe Zanna, 2012. "Public Investment in Resource-Abundant Developing Countries," IMF Working Papers 12/274, International Monetary Fund.
    5. Gonzalo Salinas & Patrick A. Imam, 2008. "Explaining Episodes of Growth Accelerations, Decelerations, and Collapses in Western Africa," IMF Working Papers 08/287, International Monetary Fund.
    6. Delfin S. Go & John Page, 2008. "Africa at a Turning Point? : Growth, Aid, and External Shocks," World Bank Publications, The World Bank, number 6421, October.
    7. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," CSAE Working Paper Series 2007-15, Centre for the Study of African Economies, University of Oxford.
    8. International Monetary Fund, 2008. "Fiscal and Monetary Anchors for Price Stability," IMF Working Papers 08/121, International Monetary Fund.
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