Economic policy uncertainty, governance institutions and economic performance in Africa: are there regional differences?

In recent years, the global economy has witnessed several uncertainty-inducing events. However, empirical evidence in Africa on the effects of economic policy uncertainty (EPU) on economic activities remains scanty. Besides, the moderating effect of governance institutions on the uncertainty-economic performance relationship in Africa and the likelihood of regional differences in the response of economic activities to EPU on the continent are yet to be investigated. To address these gaps, we applied system GMM and quantile regressions on a panel of forty-seven African countries from 2010 to 2019. We find that while global EPU and EPUs from China, USA and Canada exert considerable influence on economic performance in Africa, the effects of domestic EPU and EPUs from Europe, UK, Japan, and Russia were negligible, suggesting that African economies are resilient to these sources of uncertainty shocks. We also find that governance institutions in Africa are not significantly moderating the uncertainty-economic performance relationship. However, our results highlighted regional differences in the response of economic activities to uncertainty, such that when compared to East and West Africa, economic performance in Central, North and Southern Africa is generally more resilient to global EPU and EPUs from China, USA, Europe and UK. We highlighted the policy implications of these findings.

The asymmetric impact of economic policy uncertainty on global retail energy markets: Are the markets responding to the fear of the unknown?

Following the paucity of empirical studies on the effects of economic policy uncertainty (EPU) on global retail energy markets and the need to reassess the markets for the prevalence of rockets and feathers effect and rent-seeking behavior by retailers during the Covid-19 pandemic, we studied the asymmetric response of the markets to changes in EPU and crude oil costs. We estimated nonlinear autoregressive distributed lag models over the period 2004 M11-2020 M6 using data for global and domestic EPUs as well as gasoline, automotive diesel, domestic heating oil, industrial fuel oil and crude oil markets. We find that rising uncertainty significantly increases retail energy prices both in the short-run and long-run, especially in UK, Japan and Europe. The asymmetric patterns show that many of the markets respond more to rising uncertainty than declining uncertainty, suggesting the prevalence of the "fear of the unknown”. Our results also showed significant evidence of rockets and feathers effect in all the countries, except Canada. Furthermore, the likelihood of rent-seeking by retailers was observed in the diesel and domestic heating oil markets in Italy, UK, and France. The study concluded that these findings have important policy implications, particularly as they relate to consumer welfare, antitrust policies and stability of the policy environment.

Are anticompetitive behaviours rampant in global retail energy markets? A study of price elasticity, asymmetric price adjustment and rent-seeking.

This study investigated the role of price elasticity in the asymmetric adjustment of global retail energy prices and in the rent-seeking behavior of retail energy firms. Overall, 58 nonlinear ARDL models were estimated for the period 2004:M12 - 2016M8 using data for gasoline, automotive diesel, domestic heating oil, industrial fuel oil and crude oil markets. The results indicate that global retail energy markets are still pervasively fraught with the problems of rockets and feathers effect and the likelihood of retailers manipulating the tax system to hide rent-seeking behaviors. The results also indicate that there is more likelihood of rent-seeking activities in the markets for road fuels whose demand is relatively more price-inelastic than in the markets for non-road fuels whose demand is relatively more price-elastic, thereby suggesting that differences in market structure could offer a possible explanation for rent-seeking and asymmetric price adjustment in global retail energy markets. These results have far-reaching antitrust and consumer welfare implications, which require regulators and policy makers to interminably monitor the global retail energy markets, especially during periods of economic crisis like the ongoing COVID-19 pandemic, in order to safeguard the overall social welfare.