Instruments of analysis

Database

 Model Bank
1. Rationale

Economic policy analysis and implementation in sub-Saharan Africa in general, and in Central Africa particularly are constrained by :
  • · the unavailability of statistical data ;
  • · the unreliability and archaic nature of existing data ;
  • · inconsistency and heterogeneity of information sources ;
  • · distortion of information channels

Such constraints are further exacerbated when it comes to grasping integration mechanisms and can be found at three levels :

  • · first of all, information on socio-economic activity is patchy, and mainly stems from external sources that are sometimes divergent ;
  • · secondly, conceptual shortcomings further compromise the poor quantity of available statistical information. Most of the studies are limited to reproducing stereotyped models ;
  • · finally, the precariousness of information on socio-economic conditions is compounded by the methodological uncertainty of quantitative approaches.

2. Objectives

The establishment of a sub-regional database aims to :

  • · assess overall available data in the sub-region and identify missing and/or inadequate data ;
  • · centralize such information in order to easily reconstitute and redistribute data ;
  • · understand, from data collected, the internal functioning of local economies and their objectives, so as to determine the consistency of these special objectives, and if they can fit into a sub-regional approach of computable general equilibrium model or sector-based model;
  • · draft a trend chart to assess and monitor the main socio-economic indicators in the sub-region.

3. Data Sources
Data collection is done at three levels :

  1. data from routine sources (World Bank, FAO, BEAC, IMF, UNCTAD, etc.) which are more accessible and better organized ;
  2. data from local sources (local statistics Institutions and related bodies). They are entered in the database depending on their level of cohesion and conciliation ;
  3. data from collection/surveys. These operations involve all the operational statistics bodies in the sub-region and aim to achieve comprehensiveness and broader dialogue.

4.Scope of study
Given the extent of the scope of activity, it is necessary to begin with the following priority and sensitive areas :

  1. socio-economic activity indicators: job supply and demand, wage rates, bank interest rates, the informal sector, public income and expenditure, external trade, and other tax and budgetary policy indicators.
  2. Population and migration, education, health, underemployment and unemployment, revenues, purchasing power, poverty indicators, etc.

In addition, sampling plans and assessment documents of all operations carried out at the sub-regional level (budget and consumption survey, social surveys on employment and education…) should make up a normative working base which is essential for subsequent surveys and regional data concentration requirements.

Useful document to download : Sub-Regional Database

 1. Rationale 

Sound management of information and economic development

Most African States have adopted structural adjustment programs which consist in undertaking sector-based and macroeconomic policy reforms aimed at reducing government’s role in the management of public affairs, and liberalizing markets for a more efficient economy. The removal of operational constraints on the economy had to foster the effectiveness and efficiency of various sectors of national economy, and ensure its competitiveness vis-à-vis the outside world.

To meet the objectives of effectiveness, efficiency and competitiveness of sectors of the national and sub-regional economy, there should be a better streamlining and management of micro and macro-economic information, and consequently increasingly sophisticated tools that can help in micro and macro-economic decision-making. Economic policy-makers and managers of sector-based, national and regional economies need to be informed, for better decision-making, based on analyses on the use of these tools.

Models are among the analysis tools that contribute to macro-economic decision-making. They make it possible to analyse some sectors of the economy (partial) and national economy (general). .

These tools and the use thereof are supposed to become particularly popular in developing countries. The models are widely used today to back the decision of public authorities and donor institutions. Unfortunately, in Africa, modelling techniques still remain an almost exclusive prerogative of a closed circle of so-called specialists confined in their laboratories, and who dish out only tidbits during selective colloquiums and seminars organized on the issue

Modelling techniques should become more accessible to an increasingly large public, interested in having a good knowledge of these instruments.

The purpose of the Central Africa Sub-regional Development Centre’s model bank is to provide a first synthesis of models applied in African countries with a particular focus on Applied General Equilibrium models, which are disaggregated, consistent and complete models. These models are more satisfactory than partial equilibrium analyses, since they provide an overview of macro-economic mechanisms that underpin policy implementation, and easily adapt to time-bound data series.

This bank addresses the concerns of a wide range of users (students, consultants, researchers,…) who would like to have a better knowledge of developing economies’ modelling techniques and who can significantly contribute thereto. The bank aims to serve as a work and baseline platform for all those interested in having a better mastery of modelling techniques in African countries.

2. Some models used

To model the behaviour of economies in the face of changes in the global environment (Globalization), several tools can be envisaged, from the most rudimentary to the most sophisticated. Below are some examples :

Theoretical models : They focus on specific basic mechanisms, but are founded on imaginary and even mythical assumptions (“Closed economy without government”), “Robinson Crusoe Island”, etc 

Applied models : They draw on real situations and information to back such situations. The empirical bases are tailored to economic trends and are thus relevant with regard to the policies, environments, areas and time under consideration. It is not always easy to forecast or extrapolate, nor would such be reliable ;

Partial models : They deal with a specific aspect of the economy (generally industry), and do not capture its entire features. (Read "Expected effects of devaluation on cereal production" by Ousmane Coulibaly, Jeffrey D. Vitale, and John H. Sanders and "Planification et gestion stratégiques des interventions afin d'assurer la sécurité alimentaire et le développement durable en Afrique" (Strategic planning and management of interventions to ensure food security and sustainable development in Africa) by Abdoulaye Niang.

Econometric models : (Read "Modèle simple agrégé pour l'économie camerounaise" (« simple aggregated model for cameroon’s economy) by Armand Manga Akoa)..

Applied General Equilibrium Models (AGE Models): They are numerical applications of the Walrasian competitive general equilibrium model. They are multisectoral models where capital is linked to the use of funds and vice versa. Such models help simulate economic market mechanisms, with price flexibility, taking into account economic measures applied (e.g. export tariffs) in the countries or regions concerned. They also show existing links between sectors. Thus, by balancing supply and demand in each sector, the model simultaneously finds the price vector consistent with market equilibrium. This price vector (as well as related supply and demand) gives us the production structure, and revenue distribution to factors, government and economic institutions. Once economic policy instruments like import taxes and duties are exogenous to the model, the impact of a change of instrument can be determined by simulating it in the model. The following papers give a good insight on these type of models : 1) "libération commerciale et performances économiques du Cameroun et du Gabon; une analyse comparée à l'aide d'un MCEG" (Trade liberalization and economic performances in Cameroon and Gabon ; a comparative analysis using a CGE model) by Ernest Bamou; 2) "Des implications économiques d'un système embryonnaire de TVA : analyse du système fiscalo-douanier camerounais à l'aide d'un modèle calculable d'équilibre général" (Economic implications of a VAT system at an early stage: analysis of Cameroon’s tax and customs system through the computable general equilibrium model) by Christian Arnault Emini; 3) "Expérience de la direction générale de l'économie du Gabon en modélisation économique quantitative" (The experience of Gabon’s General Directorate of Economy in quantitative economic modeling) by Luc Oyoubi.

Multi-country or Multi-regions Applied General Equilibrium Models: General equilibrium models can be single-country; in this case the rest of the world is exogenous or multi-country, in which case bilateral and multilateral (trade) relations play an essential role in modeling, and the rest of the world is no more exogenous. These models allow for three types of approaches :

  • · The first approach analyzes the impact of reciprocal tariff policy on the economy of a given region or State. In this case, the « rest of the world » factor is disaggregated to take into account, if need be, specific inter-regional relationships. However, only the economy under consideration is explicitly modeled.
  • · The second approach analyzes the impact of a zone on several regions. Each region will be explicitly modelled and the model will take into account the characteristics of bilateral relations.
  • · The third approach aims to assess the impact of agreements involving very many regions (e.g the Uruguay Round agreements). Such an approach is very complex.

(You can also read the paper entitled "Intégration régionale et MEGC : la construction d'un modèle multi-pays" (Regional integration and the CGE model: the construction of a multi-country model) by Véronique Robihaud, John Cockburn and Bernard Decaluwé)

Applied General Equilibrium Dynamic (AGED) models  : Traditional AGE models stem from a logic of comparative analysis at a static stage. To arrive at the equilibrium solution, some variables are made constant. Within a dynamic framework, we will rather seek to secure a series of equilibrium solutions by updating, once the equilibrium is reached, the capital stock and some exogenous variables in the static analysis, before calculating the next solution. These models allow for efficient forecasts in the long-term, but are difficult to implement. (Read the paper entitled "Des implications économiques d'un système embryonnaire de TVA: analyse du système fiscalo-douanier camerounais à l'aide d'un modèle calculable d'équilibre général" (Economic implications of a VAT system at an early stage: analysis of Cameroon’s tax and customs system through the computable general equilibrium model) by Christian Arnault Emini.

GTAP Model

It is a comprehensive set that includes a database and an Applied General Equilibrium multi-regional model. GTAP data can be used with any model, but GTAP eases the use of the database by providing a baseline standard framework and a user-friendly interface, making it possible to simulate policy changes, technological developments, population growth and factor allocations. Users can quickly change the values of a model’s structure and parameters, and use it not only to analyze the overall effect of an external policy decision (or exogenous shock) on the economy, but also to assess resulting changes on resource allocations, revenue distribution and thus determine the welfare gain or loss associated with a region’s assessment.

(Read the summary paper "Utilisation du modèle GTAP" (Use of the GTAP model) presented in Kribi by Pr. Williams Masters)

GTAP data are a compiled from a wide range of various sources, including :

  • Details on comprehensive bilateral and external trade, transportation expenses between regions, for each sector,
  • · Production and its uses,
  • · National accounts and related sample behaviours.

Other developed models can be found in the presentations made during the Kribi seminar. For more details, click here.