Earticle

기존 문헌에 따르면, 많은 국가 중 특히 개발도상국은 국내 저축과 투자 사이의 간극을 좁혀 성장을 유지하기 위해 외화 유입에 의존한다. 역사적 관점에 따르면, 자본계정의 자유 화는 1980년대 국제통화기금(IMF)과 세계은행(World Bank)으로 인한 고비용에 따른 자 본 공급이 낮은 국가들에 가장 먼저 제시되었다. 이 정책의 성공은 많은 국가 내의 투자수준 을 증가시켰을 것이다. 그러나, 경제 개방과 국경을 넘는 금융거래에 대한 규제 철폐가 수여 국에 긍정적인 결과를 가져왔는지에 대해서는 아직 논의가 분분하다. 일부 연구는 긍정적 인 영향을 발견했고 그에 반해 다른 연구들은 외화 유입과 투자 간의 부정적인 효과를 보여 줬다. 게다가 대부분의 실증적 연구들은 외국인직접투자와 국내투자와의 관계에 초점을 맞추고 외화 유입이 기타 잠재적 외부 투자원을 간과할 것임에 따라 외국인직접투자만을 고려한다. 본 연구는 동아프리카공동체의 (East African Community or EAC) 5개국(르완 다, 케냐, 브룬디, 탄자니아, 우간다)에서의 외국인직접투자 (Foreign direct investment, FDI), 공적원조 (Official development assistance, ODA) 및 송금 (International remittances) 으로 세분된 외화 유입의 효과를 살펴본다. 본 연구는 1990년부터 2019년까지의 시계열 자 료에 자기회귀분배시차모형(Autoregressive Distributed Lag Model, ARDL)을 적용한다. 공적개발원조에 대한 연구 결과는 공적개발원조가 전 5개국의 국내투자에 긍정적인 영향을 끼친다는 것을 보여준다. 송금에 대한 연구 결과는 케냐의 국내투자에는 긍정적인 영향 을 미치나 르완다에는 부정적인 영향이 관측된 것을 보여준다. 이에 따라 케냐의 경우에는 더 많은 외국인 투자자 유치를 위한 정책이 필요한 반면, 다른 국가들의 경우에는 현지 기업 가를 육성하고 보호하는 것에 초점을 맞춰야 한다. 모든 EAC 국가들이 급속한 경제성장 달 성하기 위해 공적개발원조의 사용을 권고한다.

According to existing literature, many countries especially developing countries rely on foreign capital inflows (FCIs) to close the gap between domestic savings and investments and therefore securing growth. From historical view, the liberalization of capital account was first suggested to countries with low supply of capital, due to the high cost of it by IMF and the World Bank in the 1980s. The success of this policy would increase the level of investments in those countries. However, debate is still open on whether the opening up of economies and removal of restrictions on cross-border financial transactions have brought positive results on receiving countries. The existing studies show inconclusive results. Some studies found out a positive effect, whereas other studies showed a negative effect between FCIs and investment. Moreover, most empirical studies focused on the relationship between FDI and domestic investment. However, taking into account only FDI as FCIs would be ignoring other potential external sources of investment. Accordingly, this study examines the effect of FCIs which are disaggregated into foreign direct investment (FDI), official aids (ODA) and remittances on domestic investment in five members of the East African Community (Rwanda, Kenya, Burundi, Tanzania and Uganda). This paper applies the auto regressive distributed lag model (ARDL) on time series data from 1990 to 2019. The findings indicate that FDI positively affects domestic investment of Kenya while a negative effect on domestic investment is observed for the case of Rwanda and no effect on the remaining countries ( Burundi, Uganda, and Tanzania). The results for ODA show that ODA positively affects domestic investment in all five countries. The remittances results show a positive impact on domestic investment in Kenya, while a negative effect is observed for Rwanda.

This study offers an empirical microlevel analysis of the pass-through effects of the East African Community Common External Tariff on consumer prices in Kenya. Using data from the Kenya Integrated Household Budget Surveys conducted in 2005 and 2015, this research employs a fixed-effects model to estimate pass-through equations. The analysis focuses on consumer prices for agricultural and manufactured goods. It also considers household residential classifications, distinguishing between rural and urban areas, and it investigates the impact of border proximity and transportation costs on the pass-through effect. The findings show that manufactured goods have a significant pass-through effect. A 1% change in tariffs results in a 0.84% change in consumer prices for manufactured goods. However, the pass-through effects for agricultural goods were incomplete, suggesting that markets for manufactured goods are more competitive in Kenya. The study also found that pass-through effects vary depending on proximity to borders and the urban-rural divide.

The ultimate goal of regional integration is the long-term high economic growth for member states. Tax revenues are critical to achieving this objective, given the high dependence of developing countries on this fiscal revenue. However, empirical studies have been unable to determine whether regional integration improves or impedes the mobilization of taxes. We use data from 1980 to 2014 in order to estimate a tax model; the results based on the generalized method of moments technique reveal that East African regional integration has had a significant impact on tax revenue owing to the presence of good institutions. We advocate any policy agenda aimed at improving institutional environment, financial sector, macroeconomic stability, and manufacturing and trade, as well as a well-integrated approach to reduce a shadow economy. Finally, given the deleterious nature of capital account liberalization, we believe that cautiously designed capital control policies are likely to enhance tax collections in East Africa.

Regional trade arrangements are becoming an increasingly popular vehicle for the promotion of trade and growth. In East Africa the previously defunct East Africa Customs Union has been resurrected to improve trade between Kenya, Tanzania and Uganda. To facilitate the development of the East African Community, transitional arrangements have been put in place to liberalise inter and intra-regional trade. Using a partial equilibrium approach this paper quantifies and evaluates the trade and welfare effects of these arrangements for Uganda, particularly for products classified as sensitive products from the Ugandan perspective. Results vary with the level of product aggregation applied which questions whether transitional arrangements confer any real benefits on the stakeholders. The policy implications that follow suggest that selecting industries for protection should be based on predicted welfare outcomes rather than on pressure from vested interests for the partner countries to benefit from trade liberalisation within the customs union.

The aim of this paper is to quantify the economic impact of climate change on the East African Community (EAC) economy in the year 2050. We utilize the computable general equilibrium (CGE) approach. Using the Global Trade Analysis Project (GTAP) database version 10, World Bank data and so on, we forecast the global economy of the EAC in 2050 relative to 2014. The principal focus is on the role of economic agents’ adaptation response to climate change, and the possible changes in output and market prices. We implement two simulations, the baseline scenario, which does not account for climate change effects, and the policy scenario, which accounts for the impacts of climate change. The simulation results show that extreme climate change will negatively affect the real GDP and agricultural output in all of the EAC member countries. However, the producer price and the private household consumption of agricultural products will increase. Additionally, the simulation results indicate that trade in agricultural commodities is negatively affected by climate change in all EAC member countries. Our study suggests that policymakers should pay more attention to the negative impact of climate change on agricultural output by prioritizing the capacity to adapt to climate change, with a greater emphasis on irrigation systems.

This paper assesses the effectiveness of the East African Community (EAC) in integrating member countries by way of lowering total bilateral trade costs. This paper first provides information about the size and distribution of bilateral trade costs among 16 manufacturing industries over the period 1990-2012 for a sample comprising 5 EAC countries and 87 of their trade partners. The estimates indicate that it costs on average 3 times more for an EAC country to trade manufactured goods with another EAC country than to trade the goods domestically within itself. The estimates also indicate that it costs on average 8 times more for an EAC country to trade manufactured goods with a non-EAC country than to trade the goods domestically within itself. The paper then shows the importance of natural and policy-related factors in determining the trade costs.

Optimum currency area theory suggests that various characteristics are needed for a successful monetary union, including similarities in economic structures for both shocks and business cycles. Accordingly, this study uses continuous wavelets to investigate business cycle synchronization among countries of the East African Community, which is, a region working toward the establishment of a monetary union by 2024. Wavelet decomposition is an alternative and powerful tool for analyzing the comovement of business cycles. Crosswavelet coherency suggests that the business cycles of Tanzania and Uganda were in phase with that of Kenya’s at high and medium frequencies in the early 1990s and after the establishment of the customs union in 2005. Wavelet spectra clustering shows that Kenya, Tanzania, and Uganda form the core of the monetary union, whereas Burundi and Rwanda form the periphery. Overall, the wavelet analysis highlights the significance of asymmetric shocks and the prevalence of core-periphery patterns, which casts doubts on the eventual viability of the East African Monetary Union.

It is well known from economic theories that foreign capital inflows play a central role in the growth of developing countries. Many studies have been undertaken to analyze the effects of foreign capital inflows (FCIs) on economic growth using different methodologies. Nevertheless, in spite of the intense discussion on the topic both theoretically and empirically, there is no consensus on the effects of FCIs on growth. The results differ across countries. In addition, most of the existing studies focus on the effect of foreign direct investment (FDI) on growth even if FDI is not the only foreign capital inflows that countries rely on for their development. This can reduce the reliability of the estimation results due to the bias from variables omission. Therefore, this study estimates the effect of FCIs on economic growth in five countries of the East African Community (Kenya, Rwanda, Burundi, Tanzania and Uganda). The study takes together three different components of FCIs which are foreign direct investment (FDI), remittances (REM) and official development assistance (ODA) in the same estimation. Moreover, trade openness is added in the estimation based on the concept of growth theory. This paper applies the autoregressive distributed lag model (ARDL) using annual data from 1990 to 2017. The findings show that FDI has a positive impact on the growth of Kenya, Rwanda, Uganda and Tanzania, while a negative impact is found for the case of Burundi. The positive effect on growth is also found for the case of ODA on Rwanda, while a negative impact is detected for other countries. The remittances results show a positive effect on Kenya's growth, whereas a negative effect is found for the case of Rwanda. Finally, trade openness is found to spur growth only in Tanzania, while no impact and negative effect on growth are observed in Burundi, Uganda Kenya and Rwanda.

Thisstudy aimsto estimate the factorsthat affect the exports of the EastAfrican Community (EAC) members. Design/Methodology/Approach -? We employ a gravity model to analyze the determinants of export in the EAC. Twenty-eight countries are sampled for the study based on Kenya’s top 30 major exporting destinations in 2018. The estimation uses panel data covering a period of 18 yearsfrom 2001 to 2018. We apply the Pseudo Poisson Maximum Likelihood (PPML) estimator which is highly reliable and gives consistent and robust results even in the presence of heteroskedasticity. Findings -? The coefficients of all explanatory variables are statistically significant. Most of the variables such aslanguage, bilateral distance, and landlockednessshow the expected signs. Having the same official language promotes trade between countries while landlockedness and distance negatively affect export trade flows. The percentage of people using the internet exhibit negative and positive influences on exports depending on individual-specific and time-specific fixed effects. Research Implications -? In addition to the typical gravity model variables such as GDP, population, language, distance and landlockedness this paper mainly attempts to examine the effect of the interconnectedness of the EAC on export trade flows measured by percentage of a population who use the internet. The findings of the paper show some policy implications with respect to investment in infrastructure and forming economic integration