Papers by Montfort Mlachila
This paper investigates the key factors that explain the documented decline in the exchange rate ... more This paper investigates the key factors that explain the documented decline in the exchange rate pass-through in South Africa over the past two decades, which coincides with the adoption of the inflation-targeting regime. The paper conjectures, in line with the literature, that this outcome is largely due to improved monetary policy credibility. To do this, it first documents the factors that explain monetary policy credibility. Using the standard deviation of individual inflation forecasts as a measure of monetary policy credibility, its shows that the latter is negatively affected by the level of inflation itself, monetary policy uncertainty, and a measure of the unobserved stochastic volatility of inflation. The second phase proceeds by analyzing the determinants of the pass-through using the monetary policy credibility index derived from the first phase. The paper confirms the remarkable achievement that, despite the many shocks that the economy has witnessed, the declining pass-through is indeed explained by the improving monetary policy credibility.
The views expressed in this Working Paper are those of the author(s) and do not necessarily repre... more The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
RePEc: Research Papers in Economics, Sep 16, 2014
This paper proposes a new quality of growth index (QGI) for developing countries. The index encom... more This paper proposes a new quality of growth index (QGI) for developing countries. The index encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990-2011. The approach is premised on the fact that not all growth is created equal in terms of social outcomes, and that it does matter how one reaches from one level of income to another for various theoretical and empirical reasons. The paper finds that the quality of growth has been improving in the vast majority of developing countries over the past two decades, although the rate of convergence is relatively slow. At the same time, there are considerable crosscountry variations across income levels and regions. Finally, emprirical investigations point to the fact that main factors of the quality of growth are political stability, public pro-poor spending, macroeconomic stability, financial development, institutional quality and external factors such as FDI.
Social Science Research Network, 2020
HAL is a multidisciplinary open access archive for the deposit and dissemination of scientific re... more HAL is a multidisciplinary open access archive for the deposit and dissemination of scientific research documents, whether they are published or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers. L'archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.
This paper analyzes the links between financial and trade openness and financial development in S... more This paper analyzes the links between financial and trade openness and financial development in Sub-Saharan African (SSA) countries. It is based on a panel dataset using methods that tackle slope heterogeneity, cross-sectional dependence and non-stationarity, important econometric problems that are often ignored in the literature. The results do not point to a general direct robust link between trade and capital account openness and financial development in SSA, once we control for other factors such as GDP per capita and inflation. But there is some indication that trade openness is more important for financial development in countries with better institutional quality. The findings might be due to a number of factors including distortions in domestic financial markets, relatively weak institutions and/or poor financial sector supervision. Thus, African policy makers should be cautious about expectations regarding immediate gains for financial development from greater international integration. Such gains are more likely to occur through indirect channels.
This paper proposes a new quality of growth index (QGI) for developing countries. The index encom... more This paper proposes a new quality of growth index (QGI) for developing countries. The index encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990-2011. The approach is premised on the fact that not all growth is created equal in terms of social outcomes, and that it does matter how one reaches from one level of income to another for various theoretical and empirical reasons. The paper finds that the quality of growth has been improving in the vast majority of developing countries over the past two decades, although the rate of convergence is relatively slow. At the same time, there are considerable crosscountry variations across income levels and regions. Finally, emprirical investigations point to the fact that main factors of the quality of growth are political stability, public pro-poor spending, macroeconomic stability, financial development, institutional quality and external factors such as FDI.
The paper reviews the principles and practical considerations involved in the choice between fore... more The paper reviews the principles and practical considerations involved in the choice between foreign and domestic financing of fiscal deficits, and derives a series of recommendations broadly applicable to Central and West African countries. The paper develops a simple analytical framework and shows that highly concessional external debt is usually a superior choice to domestic debt in terms of financial costs and risks, even in the face of a probable devaluation. The paper stresses the importance of the availability and terms of financing, and of overall long-term debt sustainability. It concludes that these countries need to take a gradual approach to domestic debt financing, beginning with the issuance of short-term bills, and ensure a solid track record of meeting their debt-service obligations.External debt;Domestic debt;Central Africa;West Africa;public debt, debt management, central bank, budget deficit, debt service, domestic financing, external borrowing, foreign debt, debt sustainability, external financing, foreign loan, public debt management, domestic currency, debt relief, foreign borrowing, government expenditure, debt sustainability analysis, domestic borrowing, current account, primary deficit, deficit financing, balance of payments, debt burden, fiscal policy, government deficit, fiscal deficits, budget deficits, external loans, government revenue, debt servicing, central banks, debt strategy, debt management agency, debt management strategy, government deficits, external debt management, public and publicly guaranteed debt, bilateral creditors, foreign currency debt, concessional debt, debt situation, accumulation of arrears, debt crisis, government debt, long-term debt, external borrowings, domestic financial markets, public and publicly guaranteed, external public debt, debt managers, taxation, fiscal policies, currency debt, public finance, domestic debts, increase in government expenditure, commercial borrowing, debt management strategies, external debt service, long-term debt sustainability, foreign aid, fiscal management, budget constraint, debt service to exports, day-to-day debt management, domestic investors, debt recording, debt buildup, external debt sustainability, debt-service, external shocks, public sector debt, debt problem, domestic savings, commercial debt, debt ratio, principal repayments, domestic debt management, foreign loans, debt portfolio, national budget, amortization payments, government budget constraint, external debt situation, borrowing on debt sustainability, debt relief mechanisms, primary expenditure, fiscal stability, reserve bank, public deficits, government budget, debt crises, long-term external debt, debt management functions, traditional debt relief, debt-service obligations, debt management system, repayments, debt sustainability analyses, ratio of debt, debt stocks, domestic saving, traditional debt relief mechanisms, currency composition, tax system, debt burdens, stock of debt, composition of government expenditure, tax burden, debt management authority, debt outstanding, relief mechanisms
Social Science Research Network, 2002
The views expressed in this Working Paper are those of the author(s) and do not necessarily repre... more The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
IMF Working Papers, Feb 28, 2020
HAL is a multidisciplinary open access archive for the deposit and dissemination of scientific re... more HAL is a multidisciplinary open access archive for the deposit and dissemination of scientific research documents, whether they are published or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers. L'archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.
Social Science Research Network, 2018
IMF working paper, 2014
This paper proposes a new quality of growth index (QGI) for developing countries. The index encom... more This paper proposes a new quality of growth index (QGI) for developing countries. The index encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990-2011. The approach is premised on the fact that not all growth is created equal in terms of social outcomes, and that it does matter how one reaches from one level of income to another for various theoretical and empirical reasons. The paper finds that the quality of growth has been improving in the vast majority of developing countries over the past two decades, although the rate of convergence is relatively slow. At the same time, there are considerable crosscountry variations across income levels and regions. Finally, emprirical investigations point to the fact that main factors of the quality of growth are political stability, public pro-poor spending, macroeconomic stability, financial development, institutional quality and external factors such as FDI.
Social Science Research Network, 2010
This Working Paper should not be reported as representing the views of the IMF.
Social Science Research Network, 2019
While South Africa has made significant improvements in basic and tertiary education enrollment, ... more While South Africa has made significant improvements in basic and tertiary education enrollment, the country still suffers from significant challenges in the quality of educational achievement by almost any international metric. The paper finds that money is clearly not the main issue since the South Africa's education budget is comparable to OECD countries as a percent of GDP and exceeds that of most peer sub-Saharan African countries in per capita terms. The main explanatory factors are complex and multifaceted, and are associated with insufficient subject knowledge of some teachers, history, race, language, geographic location, and socioeconomic status. Low educational achievement contributes to low productivity growth, and high levels of poverty, unemployment, and inequality. Drawing on the literature, the paper sketches some policy considerations to guide the debate on what works and what does not.
IMF working paper, 2006
This Working Paper should not be reported as representing the views of the IMF. The views express... more This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper presents a new model based on the loan-pushing model by Basu (1991) to show how a domestic debt crisis can occur in a low-income country following donor herding. The model focuses on the rational herding behavior of donors due to payoff and information externalities. Although there are many theoretical models on herding behavior, these models have not formally considered the relationship between donor herding and domestic debt crisis in a low-income country. This paper is an attempt to fill this gap. The paper shows that due to donor herding behavior a domestic debt crisis can occur once the actual debt level is above the desirable one.
After close to two decades of strong economic activity, overall growth in sub-Saharan Africa dece... more After close to two decades of strong economic activity, overall growth in sub-Saharan Africa decelerated markedly in 2015-16 as the largest economies experienced negative or flat growth. Regional growth started recovering in 2017, but the question remains of how trends in the economies stuck in low gear will spill over to the countries that have maintained robust growth. This note illuminates the discussion by identifying growth spillover channels. The focus is on trade, banking, financial, remittance, investment, fiscal, and security channels, which are the most prominent and most likely to transmit growth trends across borders. In addition to bringing together findings from a broad array of existing research, the note identifies countries that are the most likely sources of regional spillovers and those that are most likely to be impacted, and provides estimates for the size of these channels. It finds that intraregional trade and remittance flows are an important channel for growth spillovers, while banking channels are less important but will remain a risk going forward. Finally, the note documents other important spillover channels through financial markets contagion, revenue-sharing arrangements in fiscal unions, commodity-pricing policies, corporate investment, and forced migration. The main takeaway is that the level of interdependence among sub-Saharan countries is higher than is generally assumed. Consequently, there is a need for additional emphasis on regional surveillance and spillover analysis, along with traditional bilateral surveillance.
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Papers by Montfort Mlachila