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Africa's Great Moderation

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  • Sebastian Krantz

Abstract

Over the past 30 years, African economies have experienced remarkable improvements in macroeconomic conditions, characterised by higher and more stable real per-capita growth rates and lower and more stable inflation. This paper documents the persistent decline in macroeconomic volatility at the aggregate and sectoral levels and seeks to provide explanations. Sectoral analysis shows a particularly strong reduction of growth volatility in agriculture and, to a lesser extent, in services. Classical structural change only explains a small fraction of the moderation. Analysis of further factors yields that changes in structural characteristics such as institutions, trade intensity and diversification, natural resource dependence or conflict incidence do not explain the moderation. On the positive side, the paper provides evidence to suggest that changes in the external environment, improved macroeconomic policy frameworks and ‘softer’ structural improvements, such as the deepening of the domestic financial sector, were important in reducing macroeconomic volatility on the continent.

Suggested Citation

  • Sebastian Krantz, 2024. "Africa's Great Moderation," Journal of African Economies, Centre for the Study of African Economies, vol. 33(5), pages 515-537.
    • Handle: RePEc:oup:jafrec:v:33:y:2024:i:5:p:515-537.
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    File URL: http://hdl.handle.net/10.1093/jae/ejad021
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    More about this item

    Keywords

    macoeconomic stability; growth; inflation; volatility; structural change; macroeconomic policy; JEL classification: O11; E30; E60;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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