Primary Commodity Exports Research Articles

AN EMPIRICAL ANALYSIS OF CAUSATIVE EFFECT OF LINGERING NAIRA DEVALUATION ON NIGERIAN ECONOMY

This study focused on the effect of the inflationary trend caused by persistent loss of value of Naira on the Economic growth and foreign exchange market in Nigeria. The study adopted quantitative research design. Data for this study were of secondary sources obtained from the Statistical Bulletin of Central Bank of Nigeria. Data collected were analysed using multiple regression. The result of the study revealed that inflation negatively affects the GDP. The loan cost on the other hand positively affects the GDP. Also, exchange receptiveness negatively affects the GDP. The study affirmed economic literature; highlighted the link between the exchange rate volatility and economic performance in Nigeria considering gross domestic product as an exponent of economic performance, thus the need to quantify the link between gross domestic product and exchange rate volatility emerges. The study suggests further diversification of the economy: an expansion in non-oil exports, adoption of measures to stimulate domestic production of essential household goods, and also encourage export of primary commodities in which the country has comparative advantage. A strong demand management of exchange rates through restrictive monetary and fiscal policies to ensure that growth of aggregate demand is compatible with a low and stable inflation is recommended. The study also recommended an adoption of a realistic exchange rate policy for naira best capable of restricting excessive demand for foreign exchange.

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

Since 2014, academic studies have increasingly underscored the potential adverse consequences associated with Azerbaijan's imbalanced and dependent economic structure. It is widely recognized that countries relying heavily on the export of primary commodities are ill-prepared for situations characterized by sharp declines in international commodity prices. Hence, the objective of this paper is to examine the Azerbaijani economy amidst two parallel developments: the growth of oil-related macroeconomic indicators and the contraction of non-oil subsectoral industrial production. To achieve this, the analytical framework of the Dutch disease, a widely preferred theory to study commodity exporters, and canonical correlation analysis (CCA) were employed in the period 1995 to 2021. The findings reveal statistically significant canonical correlations between certain subsectors of the textile industry (such as ginned cotton, cotton fabric, silk fabric, bed linen of cotton, and cotton yarn) and the Dutch disease variables (e.g., oil rent, real effective exchange rate), while other subsectors (including carpets, crocheted legwear and garments, outerwear, underwear, and footwear) do not exhibit similar patterns. These results show that non-consumer subsectors of the textile subsectors, especially the cotton sector, are more vulnerable to the effects of Dutch disease than consumer subsectors of the textile subsectors. In addition, the oil rent variable is a persistent channel that shows a negative correlation with the latent variables of the textile subsectors. These results prompt policymakers and researchers to reassess the role of large extractive industries in a small, open economy like Azerbaijan and to formulate economic policies that safeguard and foster specific subsectors.

Productive specialization and integration in South America: A global input–output analysis

In the current context, where a large part of international trade in goods and services is linked to global production chains, the policy course to reap the gains from this trade differs according to the point of view adopted. While from a country’s point of view, the strategy is to join global production chains and upgrade to higher value-added activities, from the point of view of the regions, the new scenario offers opportunities to deepen productive integration. In the present paper, we aim to examine the role played by South America in global production chains and the potential for strengthening regional integration. We observe that considering extra-regional markets, the region maintains a pattern of specialization biased towards the export of primary commodities. However, intra-regional trade is based on more technologically complex sectors with favorable prospects for promoting regional production chains.

The political economy of the African Continental Free Trade Area and structural transformation in Africa

ABSTRACTThe post-colonial economy of African countries has continued to manifest all the characteristics of its colonial origins in terms of its structure, direction, and composition. Export of primary commodities continue to take precedence over exports of manufactured products. The African Continental Free Trade Area emerged after series of negotiations to address the problem of structural transformation through value added production, services and increased agglomeration in African economies. This paper examines the extent to which the AfCFTA can foster structural transformation and socio-economic development in Africa. The paper found that despite the challenges that may affect the implementation of the agreement, AfCFTA holds great potentials for the realisation of the social transformation in Africa through creation of regional value chains, unlocking the opportunities in free movement of factors of production and enhancing a stronger voice for Africa in the negotiation of trade and investment agreements with other regions of the world.

Reviewing Trade Openness, Domestic Investment, and Economic Growth Nexus: Contemporary Policy Implications for the MENA region

This study investigates the impact of trade openness on the economic performances of selected Middle East and North Africa (MENA) countries while incorporating elements of domestic investment into the empirical analysis in the wake of dynamic sentiments for trade liberalization among nations in recent times. The study covers an empirical analysis of a panel of observations from the selected countries within the framework of the Fully Modified Least Square (FMOLS), and the Dynamic Ordinary Least Square (DOLS) regression techniques. The empirical results affirm the existence of a long-run relationship among the variables. However, while domestic investment and the size of the labor force significantly impact economic growth in the positive direction among these countries, trade openness was found to be negatively impacting on growth for the period of the study. It is therefore recommended that cogent effort should be directed towards investments that are crucial for the improvement of labor productivity and production value chains in the domestic economy to dissuade or minimize the rate of export of raw primary commodities. Also, adequate steps should be taken to improve the overall business environment, remove trade impediments, and strengthen institutions among the countries in the region to harness the benefits of trade in our increasingly globalized world.

Nigeria's Perpetual Underdevelopment and Theory of Development Policy

The paper revealed how Nigeria has remained perpetually underdeveloped by various development indicators. To explain Nigeria’s perpetual underdevelopment, the paper presented a Structural Theory of Development Policy. The theory postulates an interrelationship among four components of any economic system, comprising policy instruments (vector x), external exogenous variables (vector u), target and non-target endogenous variables (vectors y and z), impacting welfare function w(y), as illustrated below: The theory elucidates perpetual underdevelopment by the following obstacles: (i) Perverted articulation of development objectives (ii) Deficient knowledge of the economic system (iii) Excessive vulnerability to external factors (iv) Limited capacity for policy implementation The resolution of these obstacles was discussed. However, the deficient knowledge of the economic system was considered the critical factor for extensive empirical analysis. A classical illustration is the foreign-exchange excess-demand theory, empirically proven to be a false paradigm, inapplicable to the Nigerian economy characterized by overwhelming dependence on primary commodity exports, price and income inelastic demand for goods and services, double-digit inflation rate, severe political instability, and unbridled corruption fuelling capital flight. Comprehensive econometric analysis for Nigeria negated the foreign exchange excess demand theory in all its ramifications, justifying the need for foreign exchange market regulation.

Extreme risk spillovers from commodity indexes to sovereign CDS spreads of commodity dependent countries: A VAR quantile analysis

Given the financialization of commodities and the increase in the CDS markets' size and structure, we examine the co-movement and dependence structure between four commodity indexes and sovereign credit risk via an extreme volatility risk spillover methodology. We use the daily change in sovereign CDS data between October 1, 2010 to March 31, 2020 for ten commodity-dependent countries and four commodity indexes (agricultural, precious and industrial metals, and energy). The results of White et al.'s (2015) VAR for Value at Risk (VaR) and the pseudo quantile impulse response function (QIRF) show that the volatility of the primary commodity export category (e.g., agriculture, mineral, and energy) substantially influences the volatility of sovereign spreads (except for two agriculture-dependent exporters). Still, it does not always have the strongest risk spillover effect when other commodity indixes are included in the analysis. When drilling down on the data and examining the single commodity index (i.e., gold, corn, etc.), our results indicate that the primary commodity exports significantly influence the volatility of its sovereign CDS spreads. Based on the results of the QIRF, most shocks are absorbed within 30 days. Most risk spillover from the volatility of sovereign CDS spreads to the volatility of commodity indexes is found to be insignificant.

Trade openness, export structure, and labor productivity in developing countries: Evidence from panel VAR approach

This paper investigates the relationship between trade openness and labor productivity by accounting for the level of openness and the structure of exports in 61 developing countries over 1999–2018. Using panel vector autoregressive and Granger causality tests, we provide new evidence on the trade-productivity literature. We show that the trade-led productivity hypothesis does not hold for all countries, and only countries with higher levels of openness display essential productivity gains. We provide evidence for both export-led productivity and productivity-driven export hypotheses in our analysis. It is also evidenced that productivity gains can make domestic market production more efficient by reducing imports and improving the structure of exports. Following the prediction of the Dutch Disease phenomenon, we demonstrate that dependence on primary commodity exports is associated with lower labor productivity. Finally, we find that commodity-based economies should improve the overall labor productivity of their economies to accelerate economic diversification.

PROSPECTS FOR ECONOMIC COOPERATION IN CENTRAL ASIA

This research article examines the state and prospects of economic cooperation among the countries of Central Asia (CA). As history would have it, economic cooperation within the CA region was previously limited, and investments in Central Asia were mainly concentrated in the mining sector of the economy. Demographic and economic trends in the region have led to an expansion of the internal market; most Central Asian states have implemented wide-ranging reforms, which have improved the overall investment climate; and the CA states have stepped up the development of multilateral trade and economic relations, laying the groundwork for broader cooperation. The article also covers recent problems related to the economic situation in the region. For example, the current situation associated with COVID-19 has had an impact on economic relations between the CA countries. In the view of international experts, this crisis has not provided any new reasons for integration in the region. The quarantine measures taken in various Central Asian countries have had a negative effect on their foreign trade and thus on intra-regional trade and economic cooperation in general. The authors also examine other problems, such as those caused by the CA countries’ economic dependence on other countries, namely their dependence on imports from outside the region. These problems also affect the prospects of economic cooperation in Central Asia. All countries, including those rich in natural resources, want to produce and export finished goods with high value added. The production of high value added products and services enables a country to earn more revenue and reduce its dependence on primary commodity exports. The Central Asian countries are no exception. But for many reasons their finished products are often insufficiently competitive in countries outside the region. Despite the existence of economic problems connected with the need to improve the economic aspects of cooperation, there is a clear trend towards diversification of the economy of the CA countries caused by a desire to develop various specializations. These include agricultural processing, production of consumer goods for the population, development of the service sector, and other areas. Thus, the choice of a new model for the development of multilateral relations and the emerging trend towards economic growth in the region have made it possible to lay the foundation for long-term cooperation among the Central Asian states. Keywords: regional cooperation, Central Asia region, diversification of the economy, trade regimes, external economic policy, region, Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, Kyrgyzstan.

Beyond the Boom: Dependent Development and Political Change in Argentina (2010–2015)

The integration of Latin American countries into the global economy has historically proceeded through the export of primary commodities, a dependency that has long exposed them to developments in core industrial nations, changing terms of trade, and “resource curse” externalities. However, in the early 2000s, a new commodity boom coincided with the arrival of left-of-centre administrations across the region forwarding post-neoliberal visions of development where extraordinary export rents were destined to expand public spending and progressive welfare policies. While the relationship between Latin America’s left turn and this latest boom has been well-covered in the literature, much less has been said about developments in the 2010s, when the end of that boom sent many of these projects tumbling, fuelling political discontent and facilitating the arrival of conservative administrations in places like Argentina, Brazil, and Ecuador, among others. Thus, this article explores the relationship between global integration and political change by looking at the case of Argentina, and developments during the second presidency of Cristina Fernández de Kirchner (2011–2015), when falling agricultural commodity prices aggravated social tensions and political conflicts as the government sought to navigate a “governance puzzle” through which it attempted to square high public expectations for revenue redistribution with falling fiscal collection. In particular, we analyse the co-evolution of global economic conditions, macroeconomic disequilibria, and domestic political pressures, considering how this led the government to lock itself into a distributive conflict pattern that dissatisfied both opposition sectors and important segments of its support base. As such, this case study illuminates the structural challenges confronted by governments in developing economies pursuing ambitious developmental and socially-progressive agendas, while elaborating the political implications that current account and fiscal disequilibria may produce in these contexts.

Commentary: unions and the evolution of trade and industry policy under the ardern government

ABSTRACT New Zealand’s structural development has been dominated for the last generation by a strongly neoliberal, market-focused orientation. The country has signed several neoliberal free trade agreements, and for long periods largely abandoned active or strategic industry policy. It has seen the steady decline of manufacturing as a proportion of total production and of higher value manufacturing as a proportion of exports, and failed to significantly diversify its exports, retaining high dependence on a few primary commodity exports. Productivity performance has been notably poor. The Labour-led government elected in 2017 has demonstrated its willingness to at least partly break with neoliberal precepts in other policy areas; this commentary surveys its approach to date in industrial and trade policy reforms, and the role of unions in these developments. There are initial promising steps but the free trade agreements place significant restraints on what is possible.

Environmental capacities in Latin America: a comparison of Brazil, Chile, and Mexico

ABSTRACT Ecological modernization (EM) is a contested idea. Most accounts agree EM entails significant state commitment to environmental protection that accommodates environmental values to neoliberal economic growth, emphasizing the use of market mechanisms rather than command-and-control policies. Most analysts believe that less industrialized countries (LICs) have fewer capacities and incentives to adopt and pursue EM policies. We examine this assumption with a focus on the Latin American region and an emphasis on domestic efforts to increase environmental governance capacities. As mostly upper-middle and middle-income resource extractive countries whose governments have acceded to multilateral environmental conventions and adopted some form of environmental governance, Latin America presents key cases of LICs attempting to incorporate environmental values in national governance while heavily invested in neoliberal approaches to economic development. We compare Chile, Brazil, and Mexico along six environmental capacity indicators to appraise domestic performance in the areas of economic development, environmental concern, and public participation, institutional development, and green production. We find that the region is gaining capacity to address environmental challenges, but deepening these environmental gains depends on addressing core problems of poverty and inequality. Environmental capacity is also constrained by trade dependency on a limited number of markets and reliance on the export of primary commodities.

Pengaruh Ekspor Komoditas Utama terhadap Penyerapan Tenaga Kerja di Provinsi Kalimantan Selatan

This research analyzed the export of primary commodities on labor absorption in the South Kalimantan Province. The amount of data used is 15 years, which can be used in the data processing. Data is processed using panel data regression analysis. The results are finding that the effect export of primary commodities has a significant effect on labor absorption.

Commodity Production and Indigenous Institutions in Southeast Asian Long-Run Economic Development

AbstractThe Making of a Periphery makes three important claims. First, commodity export production does not necessarily result in peripheralization, which is defined as economic stagnation, depressed wages and impoverishment. Second, peripheralization is instead influenced by the specific mode of production of export commodities. Third, the mode of production is crucially determined by demographic growth and patron-client relationships. This essay investigates these claims using a variety of economic and demographic data on Southeast Asia in the nineteenth and twentieth centuries. It is shown that specialization in primary commodity exports does lower long-term economic growth rates and that indigenous institutions regarding family systems and property rights play an important role in the patterns of economic development.

Export Structure and Economic Performance in Transition Economies

Purpose: The current paper assesses the effects of export product structure on the economic growth in transition economies. Design/methodology/approach: The preferred estimation methods are Pedroni/Kao panel cointegration, along with FMOLS and Granger causality tests. The employed dataset corresponds to 11 transition economies over the period of 1997-2017. Findings: The results of empirical estimation showed that manufactured exports are not always the source of high economic growth as suggested by a vast literature. It appeared that the growth in transition economies has a higher response to the changes in exports of primary goods rather than manufactures. Practical Implications: Considering current trade patterns and the high demand elasticity attached to manufactured exports, the study concludes that selected transition economies should incorporate somewhat balanced trade policy fostering both exports of primary commodities and manufactures, where earnings from commodities should be facilitated to support rise of manufactures as it exhibits larger demand and potential to deploy technology/knowledge spillovers, thus, further complement economic growth. Originality/value: The paper represents valuable addition to the empirical literature concerning the exports and economic growth, especially for the selected sample corresponding to the remaining transition economies after massive transformation in 2004/2007 when several European states successfully completed the transition process.

African Economies in the Shadow of China: Effects of Bilateral Trade Structure on Economic Growth in Africa

This study aimed at assessing the effects of bilateral trade intensity by export categories in the China–Africa trade links on economic growth in Africa, by using a production function approach in a panel system GMM estimator. The findings suggest that conditional on the level of the logistics index and China’s FDI to Africa, economic growth tends to be greater in countries with higher index of trade intensity in manufactured exports to China. Another noticeable finding is that the potential contribution of manufactured exports to economic growth is higher than that of primary exports; African countries are constrained in their trade expansion with China by low-logistics quality. Surprisingly, the current logistics infrastructure, as low quality as they are, remain somehow adequate for primary commodity exports to China. JEL Codes: F14, F43, O19, O47, O55

Trade Openness for Developing Nations: A Charade or Desideratum for Viable Commodity Export Performance

Openness to trade is one basic factor spotted as major determinant of whether a country is prone to sudden stops in capital inflow, product glut, or severe economic recession. To some researchers, trade openness raises vulnerability to sudden shocks and creates difficult economic scenario; to others, it makes adjustment to crises less painful and stimulates effective economic performance. It is on the premise of the foregoing arguments that this study sought to evaluate the effect of trade openness on primary commodity export trade. To achieve this, the study utilized disaggregated oil and nonoil primary commodity export data and Gross Domestic Product (GDP) from Nigeria for a period of 30 years (1989-2018). Data were first subjected to diagnostic tests aided by STATA econometric to check the presence of unit root, multicollinearity and autocorrelation. Cointegration analysis was performed using Johanson and Juselius maximum likelihood estimation. Diagnosed data were regressed to generate optimal multivariate estimators of the cointegrating parameters at 95% level of confidence. Trade openness was negative but not significant on nonoil export. It was however positive but not significant on oil export. The paper concludes that while trade openness could be permissible on oil export in Nigeria, it is a charade on nonoil export. The study therefore recommends among other things the adoption of partial openness policy in developing nations especially Nigeria such that will involve the employment of liberal trade in the oil export subsector and trade protection in the nonoil subsector respectively.

Macroeconomic Impact of Agricultural Commodity Price Volatility in Nigeria

Introduction: The Nigerian economy has remained consistently heavily dependent on earnings from commodity exports which constitute over 95% external earning and 85% of budgetary and fiscal financing. Agricultural commodity exports have witnessed a significant price swings in the international market in the past few decades resulting in food price hike and macroeconomic distortions in economies heavily dependent on food imports. Methods and Materials: The study assesses the macreoconomic impact of agricultural commodity price volatility in Nigeria from 1970-2017 using Autoregressive Distributive Lag (ARDL) cointegration and Impulse-Response Function (IRF) analysis. The study adopted an atheoretical statistics to ascertain the evidence of swings in macroeconomic aggregates. Results: There was evidence of persistent fluctuations in the macroeconomic variables observed, implying that external price shocks exert a significant impact on the macroeconomic management, since bulk of national budgetary and fiscal financing is from commodity exports. Conclusion: The study found that volatile agricultural prices were responsible for a meager 2% of macroeconomic fluctuations. The empirical evidence corroborates the statistics showing that the share of agriculture in primary commodity exports has consistently remained less than 3% since the advent of crude oil. Furthermore, the study found that the swings in agricultural prices impacts foreign reserves and inflation more significantly and earlier in the time horizons than other macroeconomic aggregates.

Theotonio Dos Santos (1936–2018): The Revolutionary Intellectual Who Pioneered Dependency Theory

Theotonio Dos Santos (1936–2018): The Revolutionary Intellectual Who Pioneered Dependency Theory

Increased capital mobility and policy reform in developing countries

Since the 1950s and the 1960s when Ramaswamy deliberated on issues of development, developing economies have undergone major changes. Increased urbanisation, introduction of more complex and sophisticated technologies and reduced dependence on exports of primary commodities have brought in their wake considerable changes which warrant a new outlook on development policies. At the centre of this is the capability of governments to regulate economic activity and the associated insulation of domestic economics from international markets denoted here by the term “inner oriented” policies. Moreover, the belief that the Great Depression and the Second World War had destroyed the private international capital markets, which was borne out by the fact that during 1950s and the 1960s international capital flows were over-whelmingly on official account, is no longer valid today. This paper first reviews what is now understood as a “stylised fact” of inner oriented developing countries’ economic performance and then consider how the presence of sizeable private capital flows has altered the situation.