Abstract
This book is a collection of essays that seeks to answer three interrelated sets of questions about Africa's recent growth recovery. The first set of essays addresses questions about the drivers and durability of Africa's growth. How different is current economic performance compared to Africa's long history of boom-bust cycles? Have African countries learned to avoid past mistakes and pursued the right policies? How much of the current performance depends on good luck such as favorable commodity prices or the recovery of external assistance and how much depends on hard-won economic policy reforms. A second set of essays looks at the role of donor flows. External assistance plays a larger role in Africa's growth story than in any other part of the developing world. As a result, the economic management of external assistance is a major public policy challenge, and donor behavior is a significant source of external risk. The third set of essays looks at questions arising from commodity price shocks especially from changes in the price of oil. Relative to factors such as policy failures, conflicts, and natural disasters, how important are commodity price shocks in explaining output variability in African countries? Compared to the oil price shocks in the 1970s, why have recent higher oil prices apparently had less impact on Africa's growth? Oil is also now an important source of revenue for several oil exporting countries in Africa; what are the economic challenges faced by those countries? How should one analyze the macroeconomic and distributional impact of external and oil price shocks? As the essays in this volume show, laying the policy and institutional basis for longer-term growth, managing volatile commodity prices and aid flows, and turning growth in average incomes into growth in all incomes remain formidable but manageable challenges if Africa is to reach its turning point.
Highlights
If aid is about the future and recipients can plan consumption and investment decisions optimally over time, aid will bring about better economic outcomes in output, consumption, and investment but the potential problem of an aid-induced appreciation of the real exchange rate (Dutch disease) does not appear
The consumption and savings trade-offs follow the usual Ramsey formulation, while supply incorporates the dynamic behavior of firms that is standard in dynamic macroeconomics
The second simulation (MDG-BASE) shows the economywide effects of following a strategy that targets all Millennium Development Goals (MDGs) under a scenario of unlimited foreign aid
Summary
Sub-Saharan Africa (hereafter Africa) is the world's biggest development challenge. Much of Africa missed two decades of economic progress between 1975 and 1995, with the result that the average income per person was virtually unchanged between independence and the turn of the 21st century. Since the mid-1990s, an acceleration of economic growth in much of Africa has produced rising incomes and faster human development. This growth acceleration has raised questions and expectations about Africa’s development. This book is a collection of essays that seeks to answer three interrelated sets of questions about Africa’s recent growth recovery. The third set of essays looks at questions arising from commodity price shocks—especially from changes in the price of oil. Relative to factors such as policy failures, conflicts, and natural disasters, how important are commodity price shocks in explaining output variability in African countries? Relative to factors such as policy failures, conflicts, and natural disasters, how important are commodity price shocks in explaining output variability in African countries? Compared to the oil price shocks in the 1970s, why have recent higher oil prices apparently had less impact on Africa’s growth? Oil is an important source of revenue for several oilexporting countries in Africa; what are the economic challenges faced by those countries? How should one analyze the macroeconomic and distributional impact of external and oil price shocks?
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