Lea, Nicholas
Constraints To Growth in Malawi Lea, Nicholas [electronic resource] / Lea, Nicholas - Washington, D.C., The World Bank, 2009 - 1 online resource (48 p.) - Policy research working papers. World Bank e-Library. .
This paper applies a growth diagnostics approach to identify the most binding constraints to private-sector growth in Malawi - a small, landlocked country in Southern Africa with one of the lowest per capita incomes in the world. The approach aims to identify the constraints (in terms of public policy, implementation, and investments) most binding on marginal investment, and therefore whose relaxation would have the largest impact on growth through the investment channel. The authors find that growth in Malawi has been primarily driven by the domestic multiplier effect from export revenues. The multiplier effect is particularly pronounced due to the high number of smallholder farmers, which produce Malawi's main export crop, tobacco, and consequently results in the widespread and rapid transmission of agricultural export income. Furthermore, despite changes in the structure of agricultural production from estate to smallholder farming and liberalization of prices and finance, a longstanding relationship persists between exports in real domestic currency and overall gross domestic product. This central role of exports in creating domestic demand highlights the importance of the real exchange rate in Malawi's growth story, which directly increases the strength of the export multiplier. The most pressing constraint to growth in Malawi continues to be the regime of exchange rate management. Despite good progress, there is compelling evidence that the rate is still substantially overvalued. Furthermore, it is also likely that the inflow of foreign aid - in excess of 50 percent of exports -contributes to the overvaluation through its large component of recurrent expenditures.
10.1596/1813-9450-5097
Access to Finance
Agriculture
Currencies and Exchange Rates
Debt
Debt Markets
Economic Theory and Research
Emerging Markets
Export growth
Exports
Finance and Financial Sector Development
GDP
GDP deflator
GDP per capita
Gross domestic product
Human capital
Income
Inflation
Interest rates
Living standards
Monopoly
Multiplier effect
Overvaluation
Per capita incomes
Private Sector Development
Real GDP
Total factor productivity
Treasury bills
Constraints To Growth in Malawi Lea, Nicholas [electronic resource] / Lea, Nicholas - Washington, D.C., The World Bank, 2009 - 1 online resource (48 p.) - Policy research working papers. World Bank e-Library. .
This paper applies a growth diagnostics approach to identify the most binding constraints to private-sector growth in Malawi - a small, landlocked country in Southern Africa with one of the lowest per capita incomes in the world. The approach aims to identify the constraints (in terms of public policy, implementation, and investments) most binding on marginal investment, and therefore whose relaxation would have the largest impact on growth through the investment channel. The authors find that growth in Malawi has been primarily driven by the domestic multiplier effect from export revenues. The multiplier effect is particularly pronounced due to the high number of smallholder farmers, which produce Malawi's main export crop, tobacco, and consequently results in the widespread and rapid transmission of agricultural export income. Furthermore, despite changes in the structure of agricultural production from estate to smallholder farming and liberalization of prices and finance, a longstanding relationship persists between exports in real domestic currency and overall gross domestic product. This central role of exports in creating domestic demand highlights the importance of the real exchange rate in Malawi's growth story, which directly increases the strength of the export multiplier. The most pressing constraint to growth in Malawi continues to be the regime of exchange rate management. Despite good progress, there is compelling evidence that the rate is still substantially overvalued. Furthermore, it is also likely that the inflow of foreign aid - in excess of 50 percent of exports -contributes to the overvaluation through its large component of recurrent expenditures.
10.1596/1813-9450-5097
Access to Finance
Agriculture
Currencies and Exchange Rates
Debt
Debt Markets
Economic Theory and Research
Emerging Markets
Export growth
Exports
Finance and Financial Sector Development
GDP
GDP deflator
GDP per capita
Gross domestic product
Human capital
Income
Inflation
Interest rates
Living standards
Monopoly
Multiplier effect
Overvaluation
Per capita incomes
Private Sector Development
Real GDP
Total factor productivity
Treasury bills