Effects of external shocks, external debt and stabilisation policies on the Zambian economy
Effects of external shocks, external debt and stabilisation policies on the Zambian economy
The thesis consists of three papers. The first paper analyses the effects of shocks to the copper price on the Zambian economy in both the pre and post liberalisation periods. The paper finds that the predictions of the theory on the effects of external shocks are qualified not only by the control regime in operation but also by the existence of a huge external debt. The results from econometric tests and counterfactual analysis show that shocks to the copper price can have Dutch Disease consequences in a liberalised economic environment. However, the effect is not strong. We argue that this is more likely a result of the country’s heavy indebtedness. We also show that with the reversal of the net foreign asset position after the negative shock of 1974, there is no guarantee that a positive shock will lead to an investment boom. In a controlled regime, we find that the Dutch Disease effects of a positive copper price shock are ameliorated. These results do not come out clearly from previous studies.
The second paper analyses the effect of stabilisation policies in the face of limitations in external financing. The results from econometric tests show that the use of the monetary approach to correct for balance of payments disequilibria is inappropriate in Zambia. However, monetary policy is appropriate for controlling inflation and stabilising the exchange rate but has no effect on real GDP. The results also show that the real exchange rate has an insignificant effect on the balance of payments. The relative price effects (real exchange rate effects) work through imports and not exports so that the overall effect is insignificant. Since investment has a high import content, a policy of devaluation adopted in order to correct for balance of payments disequilibria has adverse effects on investment and hence future growth.
The third paper applies the intertemporal model of the current account to Zambia.
University of Southampton
Pamu, Mulenga Emmanuel
c6e65f16-61e1-4ebb-821c-afabe3908118
2002
Pamu, Mulenga Emmanuel
c6e65f16-61e1-4ebb-821c-afabe3908118
Pamu, Mulenga Emmanuel
(2002)
Effects of external shocks, external debt and stabilisation policies on the Zambian economy.
University of Southampton, Doctoral Thesis.
Record type:
Thesis
(Doctoral)
Abstract
The thesis consists of three papers. The first paper analyses the effects of shocks to the copper price on the Zambian economy in both the pre and post liberalisation periods. The paper finds that the predictions of the theory on the effects of external shocks are qualified not only by the control regime in operation but also by the existence of a huge external debt. The results from econometric tests and counterfactual analysis show that shocks to the copper price can have Dutch Disease consequences in a liberalised economic environment. However, the effect is not strong. We argue that this is more likely a result of the country’s heavy indebtedness. We also show that with the reversal of the net foreign asset position after the negative shock of 1974, there is no guarantee that a positive shock will lead to an investment boom. In a controlled regime, we find that the Dutch Disease effects of a positive copper price shock are ameliorated. These results do not come out clearly from previous studies.
The second paper analyses the effect of stabilisation policies in the face of limitations in external financing. The results from econometric tests show that the use of the monetary approach to correct for balance of payments disequilibria is inappropriate in Zambia. However, monetary policy is appropriate for controlling inflation and stabilising the exchange rate but has no effect on real GDP. The results also show that the real exchange rate has an insignificant effect on the balance of payments. The relative price effects (real exchange rate effects) work through imports and not exports so that the overall effect is insignificant. Since investment has a high import content, a policy of devaluation adopted in order to correct for balance of payments disequilibria has adverse effects on investment and hence future growth.
The third paper applies the intertemporal model of the current account to Zambia.
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Published date: 2002
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Local EPrints ID: 464853
URI: http://eprints.soton.ac.uk/id/eprint/464853
PURE UUID: 6cf30888-86be-481b-a3fc-ef72fa2dc94a
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Date deposited: 05 Jul 2022 00:05
Last modified: 16 Mar 2024 19:47
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Author:
Mulenga Emmanuel Pamu
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