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Trade

Commodity prices and African economies

Shanta Devarajan's picture

Once again, commodity prices are on the rise

Unlike in 2008, when oil importers and exporters experienced symmetric shocks (one negative, the other positive), this time it appears as if both oil exporters and some oil importers in Africa are experiencing positive shocks. 

The reason is probably that, along with oil prices, other minerals such as gold and copper, cotton, and cocoa prices are also up—so even an oil importer may have on net a favorable terms of trade shock.  In addition, although some world food prices are rising, most food is domestically produced and not traded, so the negative effect of that may also be muted.  Of course, the situation may change if oil prices rise even further.

The following summary table, taken from the complete data set prepared by my colleague Cristina Savescu, gives the ten countries with the biggest positive and negative terms of trade shocks between December 2009 and December 2010, as a share of 2009 GDP.  

Terms of trade change December 2009-December 2010 as a percent of 2009 GDP:

Seven steps to structural transformation

Shanta Devarajan's picture

 

 

 

 

 

 

 

 

 

 

 

 

 

My colleagues Justin Lin and Celestin Monga have proposed a six-step plan for identifying industries that could help developing countries industrialize. 

The first step in the plan is to find countries that have a per-capita income that is roughly double yours and have a similar endowment, and observe what they are producing.  These industries would then serve as the basis for possible government intervention to either protect or create, depending on the country’s situation.

However, the six-step plan seems to gloss over the fact that countries, even seemingly successful ones, produce certain goods for political rather than economic reasons. 

Les leçons tirées de l'intégration européenne sont-elles pertinentes pour l'Afrique?

Dirk Reinermann's picture

Read this post In English

Alors que j’ai récemment quitté l'Afrique du Sud pour m’installer en Belgique, une question s’impose à moi : l’Union européenne et ses six décennies d'intégration constituent-ils un exemple pertinent pour l'Afrique ? Ou alors est-ce comme comparer des pommes avec des mangues ?

Delivering Aid Differently – The New Reality of Aid

Wolfgang Fengler's picture

This month Homi Kharas and I published a book titled “Delivering Aid Differently – Lessons from the Field”. We launched the book yesterday at the University of Nairobi.  Here is a summary of the main messages:

We live in a new reality of aid. Rich countries delivered US$ 3.2 trillion of aid to poor countries between 1960 and 2008, and it is a US$ 200 billion dollar industry today. Despite disputes and convulsions, the core of the aid industry has changed little over the past few decades. Now the new pressures on the aid systems may be too strong to resist fundamental change.

Patrick v. Shanta, Round 2

Shanta Devarajan's picture

Patrick Bond’s lengthy comment on my response to his blog post merits a separate blog post.

Patrick:
Thanks for your response.  It appears as if there are at least four areas where we end up agreeing, except that I reach these conclusions using economic reasoning, which also serves to highlight some differences.

1. I’m glad you agree that there is a difference between accounting and economic welfare.  But you still don’t seem to accept the result of my simple example of two countries (one following a wasteful trajectory and the other the optimal one) that genuine savings is the same in both cases. 

Running on One Engine

Wolfgang Fengler's picture

This week, the World Bank launched its second Kenya Economic Update. We have been positively surprised to see such a strong uptake of our previous report and were pleased to have a full house at the launch and informal briefings we have in the run-up of the launch. These Economic Updates aim to replicate a model of shorter, crisper and more frequent country economic reports, which have become a trademark of the World Bank’s analytical presence in other countries, in particular China and Russia.

Varieties of African successes

Shanta Devarajan's picture

Tolstoy notwithstanding, the 20 African success stories described in the booklet “Yes, Africa Can” show that success comes in many different forms.  Broadly speaking, the cases fall into three categories:

- Success from removing an existing, major distortion.  The best example is Ghana’s cocoa sector, which was destroyed by the hyperinflation and overvalued exchange rate in the early 1980s.  When the exchange rate regime was liberalized and the economy stabilized, cocoa exports boomed (and continue to grow).  Similar examples include Rwanda’s coffee sector and Kenya’s fertilizer use.  Africa’s mobile phone revolution, too, is an example of the government’s stepping out of the way—in this case by deregulating the telecommunications sector—and letting the private sector jump in. 

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