TY  - BOOK
AU  - Lea,Nicholas
AU  - Hanmer,Lucia
AU  - Lea,Nicholas
TI  - Constraints To Growth in Malawi
PY  - 2009///
CY  - Washington, D.C.
PB  - The World Bank
KW  - Access to Finance
KW  - Agriculture
KW  - Currencies and Exchange Rates
KW  - Debt
KW  - Debt Markets
KW  - Economic Theory and Research
KW  - Emerging Markets
KW  - Export growth
KW  - Exports
KW  - Finance and Financial Sector Development
KW  - GDP
KW  - GDP deflator
KW  - GDP per capita
KW  - Gross domestic product
KW  - Human capital
KW  - Income
KW  - Inflation
KW  - Interest rates
KW  - Living standards
KW  - Monopoly
KW  - Multiplier effect
KW  - Overvaluation
KW  - Per capita incomes
KW  - Private Sector Development
KW  - Real GDP
KW  - Total factor productivity
KW  - Treasury bills
N2  - 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
UR  - http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-5097
ER  -