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Africa's macroeconomic story

Author

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  • Hostland, Douglas
  • Giugale, Marcelo M.

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.

Suggested Citation

  • Hostland, Douglas & Giugale, Marcelo M., 2013. "Africa's macroeconomic story," Policy Research Working Paper Series 6635, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6635
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    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/10/03/000158349_20131003125106/Rendered/PDF/WPS6635.pdf
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    References listed on IDEAS

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    1. repec:wsi:jicepx:v:06:y:2015:i:01:n:s1793993315500039 is not listed on IDEAS
    2. International Monetary Fund, 2008. "Fiscal and Monetary Anchors for Price Stability; Evidence from Sub-Saharan Africa," IMF Working Papers 08/121, International Monetary Fund.
    3. Andrew Berg & Rafael Portillo & Shu-Chun S Yang & Luis-Felipe Zanna, 2013. "Public Investment in Resource-Abundant Developing Countries," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(1), pages 92-129, April.
    4. Patrick Imam & Gonzalo Salinas, 2015. "Explaining Episodes of Growth Accelerations, Decelerations, and Collapses in Western Africa," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-33.
    5. 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.
    6. Rabah Arezki & Frederick van der Ploeg, 2007. "Can the Natural Resource Curse Be Turned into a Blessing? The Role of Trade Policies and Institutions," Economics Working Papers ECO2007/35, European University Institute.
    7. International Monetary Fund, 2009. "Spillovers From the Rest of the World Into Sub-Saharan African Countries," IMF Working Papers 09/155, International Monetary Fund.
    8. Delfin S. Go & John Page, 2008. "Africa at a Turning Point? : Growth, Aid, and External Shocks," World Bank Publications, The World Bank, number 6421, April.
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    Cited by:

    1. Cesar Calderon & Sebastien Boreux, 2016. "Citius, Altius, Fortius: Is Growth in Sub-Saharan Africa More Resilient?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 25(4), pages 502-528.

    More about this item

    Keywords

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

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