Empirical analysis of inflation sources in Senegal

Moubarack Lo, Amaye Sy, Ibrahim Souleymane Amadou

The objective of this study is to explain the dynamics of inflation in Senegal. To this end, a Structural VAR model on monthly data covering the period January 2015 – July 2022 was used.

The econometric model includes various national macroeconomic variables (industrial production index, money supply, harmonised consumer price index) and foreign variables (oil price, imported product price index, Dollar/FCFA exchange rate). The results show that, in the short term, world prices are the main determinants of the general price level in Senegal. A 1% rise in imported product prices would generate a 0.55% rise in the HICP the following month. Furthermore, in the short term, over 75% of price fluctuations are explained by their own past variations (inertia effect), and between 21.5% and 25.2% by the prices of imported products.

Deep Trade Agreements, Institutions and Global Value Chains: Evidence from Egypt

Fatma Aly, Chahir Zaki

This paper investigates the nexus between deep trade agreements, institutional quality and global value chains (GVCs) in Egypt. In reality, the enforcement of deep trade agreements requires good institutions, in order to boost GVCs. Applying a Poisson Pseudo-Maximum Likelihood (PPML) estimator to control for heteroscedasticity and zero trade flows, we use bilateral and sectoral data on Foreign Value-Added (FVA) exported by Egypt from the Eora dataset and merge it with the Deep Trade Agreement Dataset (World Bank). The findings of the paper support the positive relationship between the depth of trade agreements and GVCs at the aggregated level. In addition, differences in the quality of institutions reduced this positive effect. However, the sectoral analysis revealed much heterogeneity across different sectors. Comparing the coefficients of trade agreements for different periods, one can conclude that GVC linkages in human capital and technology-intensive products have started to respond to deep trade agreements, pointing towards agreement depth being highly relevant in respect of export upgrading. From a policy perspective, this paper highlights the importance of deepening agreements if the participation of African countries in GVCs, including Egypt, is to be increased.

Aid for Trade and Export Performance of Recipient Countries: The Moderating Role of Institutions

Nora Aboushady, Georges Harb, Chahir Zaki

Using dyadic trade data and bilateral aid for trade (AfT) figures from the OECD Creditor Reporting System (CRS) for a sample of 155 countries over the period 2002-2019, we implement a gravity analysis, to assess whether bilateral aggregate AfT and AfT for trade policy and regulation flows have managed to bolster exports of AfT-recipient countries to donors. We also examine if the institutional distance between recipients and donor countries affected the efficacy of AfT in promoting the former’s bilateral exports. When accounting for the large heterogeneity amongst recipient countries, in terms of geographical location and income level, our investigation yields the following results: i) AfT flows tend to foster exports of recipients, both at the extensive margin (AfT augments the recipients’ likelihood of exporting) and intensive margin (AfT stimulates the recipients’ exports); ii) the trade-stimulating effect of AfT for trade policy and regulation is more pronounced than that of aggregate AfT flows; iii) institutional disparities between trading partners dampens the effectiveness of AfT in promoting exports at both margins of trade; and iv) the stimulating effect of AfT on trade in recipient countries varies with their geographical location and income level. Our findings suggest that i) allocating aid flows, notably the ones targeting trade policy reforms, are likely to speed-up the insertion of developing countries into world markets; and ii) strengthening governance in AfT-beneficiary countries and closing their institutional gap with donors would enhance the effect of AfT on their exports.

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