Optimal Deficit Financing in a Constrained Fiscal Space in Ghana

Alagidede, Paul; Mensah, Jones Odei; Ibrahim, Muazu

doi:10.1111/1467-8268.12337

Cited by 25 publications

(22 citation statements)

References 46 publications

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“…This was the case with the analysis conducted by Onwioduokit () that tested the validity of the threshold of 4 per cent of GDP proposed as a fiscal convergence criterion limiting the public deficit for ECOWAS countries not belonging to WAEMU area. Empirically, the thresholds determined by this approach are robust and reflect the economic realities of countries (Adam and Bevan, ; Ndoricimpa, ; Alagidede et al ; Agbékponou and Kebalo, ). It takes into account the macroeconomic behaviour of countries and the period of analysis considered.…”

Section: Methodology and Datamentioning

confidence: 99%

Single Currency in ECOWAS: Is the Proposed Fiscal Convergence Criterion Pro‐Growth?

Amadou¹,

Kebalo²

2019

African Development Review

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To facilitate the introduction of a single currency in Economic Community of West African States (ECOWAS), the fiscal convergence criterion currently proposed by countries limits the public deficit to 3 per cent of GDP. According to the literature, the limitation of the public deficit to a given threshold is the most fundamental norm of the various convergence pacts existing and needed for monetary integration. Through a nonlinear panel data model, this paper tests the validity of the threshold by determining the public deficit threshold not to be exceeded so that fiscal policy has a positive effect on economic growth. Over the decade 2007-2016, this threshold is estimated at 4.74 per cent of GDP. Thus, the paper concludes that the proposed convergence criterion of 3 per cent of GDP is pro-growth. However, in relation to the estimated threshold, there is a room for manoeuvre that can be used for supporting economic growth. Thus, the proposed threshold could be readjusted upward. The analysis also reveals that only four countries in ECOWAS are on the track to respect in the future, the proposed fiscal criterion and therefore are taking an important step toward the adoption of the future currency. The other countries need to make significant fiscal consolidation operations before hoping to adopt the single currency on the basis of fiscal discipline.

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Section: Methodology and Datamentioning

confidence: 99%

Single Currency in ECOWAS: Is the Proposed Fiscal Convergence Criterion Pro‐Growth?

Amadou¹,

Kebalo²

2019

African Development Review

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“…To proceed with the threshold estimation, similar to Alagidede, Mensah, and Ibrahim (2018), we first test the hypothesis of linearity as against threshold as the foundation for threshold estimation. Thus, we test if

α_{i 1} = α_{i 2}

α_{i 1} \neq α_{i 2}

.…”

Section: Data and Sourcesmentioning

confidence: 99%

Is the interest rate setting behaviour of the Bank of Ghana constrained by high debt levels?

Iddrisu

Alagidede

2020

African Development Review

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While assertions of debt constraints on monetary policy have been documented in the literature, empirical investigation into this phenomenon remains egregiously limited, with the only study using the Generalized Method of Moments that fails to provide confidence intervals for the threshold estimate. We examine whether or not high debt levels constrain the interest rate setting behaviour of the Bank of Ghana, with the aid of sample splitting and a threshold estimation technique that overcomes the weaknesses of previous studies. We find that monetary policy response to inflation gap in the high debt regime (above the debt to gross domestic product [GDP] threshold of 35.1%) is woefully disproportionate, a key indication of debt constraint and inflation accommodation by a central bank that is supposed to be targeting inflation. Important policy recommendations are proffered.

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“…This study therefore departs from the earlier approach by employing Hansen's (2000) sample splitting approach which relies on asymptotic theory to estimate the threshold. This approach has also been used in examining the relationship between financial development and economic growth in SSA (Ibrahim & Alagidede, 2017); fiscal policy and economic activity in developing countries (Slimani, 2016) and optimal fiscal deficit in Ghana (Alagidede, Mensah, & Ibrahim, 2018). The Hansen's (2000) sample splitting approach estimates the regression parameters by making use of the least square estimation which unearths the exact nature of the threshold in addition to revealing the statistical significance of all the thresholds identified.…”

Section: Data and Empirical Strategymentioning

confidence: 99%

Threshold Effects of Financial Sector Development on International Trade in Africa

Sare

2019

Int. J Fin Econ

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Earlier studies on threshold effects of financial sector development on international trade have relied on rudimentary approach which assumes exogenous inclusion of quadratic square terms of finance. However, findings from such studies are not instructive as it obscures country's unique domestic conditions such as differences in the levels of financial sector development. By relying on 46 countries in Africa over the period 1980–2016, this study employs a sample splitting and threshold estimation approach which allows finance–international trade to be mediated by the level of domestic financial sector development. We find evidence of threshold effects for a number of the countries suggesting that the precise impact of financial development on international trade is threshold–specific given the various indicators of finance. The study highlights that whether finance supports or limits international trade crucially depends on the attainment of a certain threshold which is both country and indicator–specific.

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Optimal Deficit Financing in a Constrained Fiscal Space in Ghana

Cited by 25 publications

References 46 publications

Single Currency in ECOWAS: Is the Proposed Fiscal Convergence Criterion Pro‐Growth?

Single Currency in ECOWAS: Is the Proposed Fiscal Convergence Criterion Pro‐Growth?

Is the interest rate setting behaviour of the Bank of Ghana constrained by high debt levels?

Threshold Effects of Financial Sector Development on International Trade in Africa

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