Economic Resilience in Sub-Saharan Africa An Analysis of The Determinants

Volume 6, Issue 6, June – 2021 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Economic Resilience in Sub-Saharan Africa :

An Analysis of the Determinants
Willy NOUMESSI FODJOU Armand Gilbert NOULA Juliette MEVAMBA-CHEKEM
University of Dschang, Cameroon University of Dschang, Cameroon University of Dschang, Cameroon
Abstract:- This paper examines the macroeconomic oil shocks of 1973 and 1979 and more recently the oil price
factors related to economic structure and institutions that crash of 2014 are illustrations of this. In addition, economic
are most important for economic resilience in order to growth prospects can also be derailed by climate hazards
guide future policy actions. This is done through affecting growth performance in agricultural countries in
econometric analysis by assessing the absorptive capacity particular. This situation is observed in the case of countries
of common shocks for sub-Saharan African countries. with crops that are highly dependent on rainfall. Other shocks
The results suggest that factors related to economic have internal origins. These include unsustainable fiscal
structure appear to be the most important. These include policies that put pressure on public finances and structural
exchange rates, terms of trade, trade openness, foreign and institutional weaknesses that exacerbate fluctuations in
direct investment and financial development. Institutional economic activity.
factors such as government stability and reduced social
conflict increase the absorptive capacity to shocks. These One way to tackle this problem is economic resilience.
findings reiterate the need to identify and vigorously Indeed, the latter has been the subject of renewed interest in
pursue macroeconomic policies and structural reforms. economics in the aftermath of the Great Recession of 2008,
which has led to a renewed interest in the study of shocks, but
Keywords:- Economic Resilience, Generalized Methods of has reoriented the debate towards the capacity of economies
Moments, Shocs, Structural Factors, Sub-Saharan Africa. to recover from shocks (Sanchez, 2016). Indeed, the Great
Recession and its uneven consequences within and across
I. INTRODUCTION countries have posed new challenges to policy-making and, in
particular, to the design and adoption of policies that can help
For several decades, the world economy, and more different economies bounce back from the deep crisis and
specifically that of developing countries, has been support inclusive growth (Lagarde, 2017). In this sense, the
experiencing a great deal of turbulence caused by fluctuations unevenly distributed effects of the crisis across countries have
in the international economic situation, which have often had been the source of a wealth of research in an effort to
an impact on their economic development to varying degrees. understand these differences and explore the recovery paths
The intertwining of several factors has often been at the that underpin economic resilience (Brigulio et al. 2006 ;
origin of such a situation. Indeed, in an economic context Duval and Vogel, 2008 ; Briguglio et al. 2009 ; Pendall et al.
marked by trade liberalisation and economic integration 2010 ; Kose and Prasad, 2010 ; Guillaumont, 2009;
promoting greater global competitiveness, exposure factors Antosiewicz and Lewandowski, 2014; Ngouhouo and
have increased beyond those linked to multiple threads of Nchofoung, 2021). These studies cover different realities
history and culture. Among the factors of uncertainty, the ranging from many European countries to some developing
interconnection between countries through technology and countries, as well as at different levels of analysis (Bergeijk et
capital transfer, trade, financial markets, and advances in al. 2017).
information and communication technologies are the most
observed sources of vulnerability. This interdependence has In recent years, the focus on the design and
favoured the proliferation of deep shocks and crises with development of economic policies capable of maintaining an
sinister and perverse consequences on economic economy's output at its potential in the face of shocks has
performance. An illustration can be seen in the great financial increased the scope of economic resilience analysis. In this
crisis of 2008 which originated in the United States and sense, studies have first relied on theoretical design to define
spread to the global economy with negative repercussions on operational measures for empirical analysis. In this respect,
the real economy. two groups of measures seem to emerge. The first have
focused on its measurement through composite indicators
On the other hand, the abundance of natural resources in (Brigulio et al. 2009; Advantage West Midlands, 2010;
most developing countries, such as those in sub-Saharan Ngouhouo and Nchofoung, 2021). This measure is based on
Africa, has led to high exposure to international price economic factors capturing macroeconomic stability and
fluctuations, especially with their low diversification (IMF, market efficiency and socio-political factors capturing good
2016). Similarly, countries with a high dependence on political governance and social development. The second
imports of essential commodities are at the mercy of group focuses solely on the behaviour of macroeconomic
unpredictable changes in world prices of these products. The aggregates that contribute to macroeconomic and financial
IJISRT21JUN1006 www.ijisrt.com 796

ISSN No:-2456-2165
stability such as economic growth and the output gap characteristics. Finally, it is also important to recognize that
(Sondermann, 2018; Jolles et al. 2018). On the other hand, the potential for success of structural reforms is not the same
some authors have used these measures to try to assess the in all areas, as some structural characteristics are linked to the
resilience of economies (Dhwane and Jeske, 2006; degree of economic development and only change over the
Antosiewicz and Lewandowski, 2014; Duval and Vogel, long term.
2008; Elbourne et al. 2008; Hassan and Othman, 2015;
Abdullah and Hassan, 2018). It turns out that countries with To fill this gap, this paper aims to provide a better
an advanced stage of development and integration into the understanding of the determinants of economic resilience.
global economy are often more resilient (Kose and Prasad, The explanatory factors of resilience may be a combination of
2010). However, despite these theoretical and empirical several economic, social and institutional factors. This article
achievements, several aspects have not yet been explored, contributes to the existing literature on the determinants of
particularly in the context of developing countries such as economic resilience.
those in sub-Saharan Africa.
The remainder of the paper is organised into three
Furthermore, the differences in resilience observed sections, including the methodological approach, the results
between countries and regions, as revealed by the studies and the conclusion.
mentioned above, pave the way for research into a new field
of analysis in order to understand the factors that explain II. METHODOLOGY
these differences. This calls for more research, particularly
into the factors that determine the economic resilience of a In order to identify the determinants of economic
given country or area. In this sense, few studies have been resilience in sub-Sahara african countries, we start, with some
conducted, but those that do exist have focused on structural differences, from Sondermann's (2018) modelling strategy
(Duval et al., 2007; Duval and Vogel, 2008; Martin et al., based itself on the static seminal approach of Canova et al.
2016; Sondermann, 2018) and institutional factors (2012) to specify resilience in Sub-Saharan African countries.
(Gianmoena and Rios, 2018; Jolles et al., 2018). To the best
of our knowledge, these studies have focused on European A. Model specification
and OECD countries. Following Sondermann (2018) and Jolles et al. (2018),
we consider a dynamic panel output gap equation to explain
However, there is relatively little work on sub-Saharan the determinants of economic resilience defined in terms of
Africa. With the exception of the notable work of Adom the shock absorbing capacity of each country (measured by
(2016) and Ngouhouo and Nchofoung (2021) on assessing the the joint shock response coefficient in equation 1). The choice
state of economic resilience. For the few who have looked at of this model is justified by the fact that it takes into account
the effects of shocks, most have limited themselves to the the individual and temporal dimension. Unlike the study by
sources of fluctuations and their impacts on the economy Duval and Vogel (2008) which analyses the role of structural
(Hoffmaister et al., 1998; Sissoko and Dibooglu, 2006; policies in explaining economic resilience in OECD countries
Rasaki and Malikane, 2015). According to these authors, the and the study by Jolles et al. (2018) which identifies the
main sources of output fluctuations are external and relate to determinants of resilience in the Euro zone, this article re-
changes in the terms of trade, primary commodity prices and examines these determinants in SSA countries. The aim is to
world interest rates. In addition, the analysis in terms of identify the conventional (economic structure-related) and
resilience to the effects of these shocks has often been taken unconventional (institutional) factors that affect the
into account in the study of convergence and heterogeneity absorptive capacity of an economy, according to the equation
between countries (Bah, 2015). In addition, by taking into below.
account regional integration, a study by Ehrhart and Jacolin,
(2012) tries to highlight the mitigating capacity by showing yit     St   X it   St X it  Di   it (1)
how the economies of the franc zone could contain the effects
of price shocks. Similarly, other authors highlight economic
resilience by examining the dynamics of the behaviour of Where, yit represents the output gap, St common
economies following internal and external shocks within a shocks, and X it the set of variables explaining the behaviour
monetary union (Coulibaly and Gnimassoun, 2013).
of the output gap following a common shock. The interaction
There is therefore a renewed interest in the lack of in- action between these factors and common shocks ( St X it )
depth studies on economic resilience in the context of indicates the absorption of the effects of shocks on the output
developing countries in SSA. Given the heterogeneity among gap, with i and t indicating country and time specificities
countries in the region, the effects of shocks may vary from respectively.
country to country, as may adjustment and recovery. Thus, in
order to guide structural reforms, it seems necessary to In reality, each economy is subject to both idiosyncratic
identify the more detailed structural characteristics of and common shocks. In addition, shocks can be of different
countries that can contribute to their ability to withstand the nature, such as productivity shocks, confidence shocks or
impact of adverse shocks. Similarly, in order to prioritise preference shocks. It is important to note that shocks are not
between different structural reforms, it is necessary to assess directly observable and have to be estimated.
the impact of a wide range of structural and institutional

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Focusing on unobserved shocks is interesting for two B. Variable specification and justification
reasons : i) it highlights how country-specific factors shape The annual data collected for this study are extracted
the effects of common shocks on output gaps, which is the from the World Bank database (WDI, 2018) for structural
primary aim of this study ; ii) it is a structural approach given variables, and from the ICGR database (2019) for
the wide variety of shocks that actually occur, some of which institutional variables. They cover the period 1995-2017 for
would be difficult to capture in the econometric framework 25 SSA countries3. Several structural and institutional
adopted here. However, this modelling choice also has its variables are defined to examine their capacity to absorb
limitations. In particular, the omission of idiosyncratic shocks shocks and increase economic resilience
and the failure to distinguish between supply and demand  Output gap : This is the percentage difference between
shocks increases the risk of omitted variable bias in the actual output and potential output. It is used as a measure
econometric estimates. Another potential source of estimation of economic resilience in this study following Duval and
bias is that output gap estimates are subject to measurement Vogel (2008) and Jolles et al, (2018). Its determination is
error. imperative and the problem of method choice arises.
 The choice of the measurement of the output gap
Determining common shocks  There are several possible methods for estimating output
There are several methods for estimating common gaps4, such as the Hodrick-Prescott (HP) and Baxter-King
shocks but we retain the structural method developed by (BK) filters or the OECD methodology which derives
Sondermann (2018) following the approach of Canova et al. potential output from a production function approach.
(2011). This method advocates a VAR (Vector Most characteristics of business cycles are robust to all
Autoregressive) approach to extract common shocks over the these methodological choices (see Duval et al., 2007, for a
period from 1995 to 2017. It is composed of three variables: detailed analysis). The analysis below is therefore based
real GDP, the consumer price index (CPI) and the money on a single method for assessing economic resilience, the
supply (M2). Indeed, the analysis of the evolution of the Hodrick-Prescott (HP) gap measure. To this end, a
asymmetry of economic shocks reveals the presence of strong Hodrick Prescott (HP)5 filter is used to decompose the
asymmetries of supply shocks, inflationary shocks and series into trend and cyclical components to isolate the
monetary shocks. These shocks have specific effects on trend, which is then defined as potential output, by solving
macroeconomic variables. Generally speaking, a positive the following program :
supply shock leads to an increase in production, thus a
decrease in the price level. A positive demand shock does not T
affect long-run output, but does lead to a change in aggregate Min (ln Yt  ln Yt * ) 2
demand. Finally, a monetary shock has no long-term effect on t 1
output and real balances. On the other hand, it has a Under restraint,
significant impact on all variables in the short run. Thus, the
three-variable VAR estimated at level1 with the number of T 1
lags determined by the Akaike and BIC2 criteria is written :  (ln Y
t 1
*
t 1  ln Yt *   ln Yt *  ln Yt *1  ) 2  
 yt   yt 
  We rewrite :
Xt  A  L  X t i   t X t   pt  and  t   pt  T T 1 2
 mt    Min (ln Yt  ln Yt )    (ln Y  ln Yt )  (ln Yt  ln Y ) 

* 2 *
t 1
* * *
t 1
 mt  t 1 t 2
*
Where Yt is the observed GDP at constant prices, Yt
is the trend or potential GDP at constant prices  is a number
The residuals are obtained using the Choleski
decomposition. Having GDP first (with t the time index)
implies that the unpredictable part of GDP is due mainly to chosen to be small as a minimisation threshold,  is a
pure GDP shocks. For prices (𝑝 the unpredictable part is due
to GDP and price shocks only, and so on. For money (𝑚) the 3
Anglola, Burkina Faso, Cameroon, Ivoiry Coast, Congo,
interpretation of a money demand type relationship is DRC, Guinea, Botswana, Gabon, Ghana, Gambia, Kenya,
consistent with a final monetary classification. The series on Malawi, Mali, Mozambique, Madagascar, Niger, Nigeria,
the error term from the VAR specification is then used as a Sierra Leone, Senegal, South Africa, Tanzania, Togo,
common (unobserved) shock. The graph in the appendice Ouganda, Zimbabwe.
shows the estimation of the common shocks. 4
The output gap is the percentage difference between actual
and potential output. While actual output can be observed
with some precision, potential output is unobservable and
must be inferred from the available data.
5
The Hodrick-Prescott (HP) filter isolates a stochastic trend
1
For the extraction of shocks from a VAR model, the by introducing a trade-off between obtaining a good match
stationarity properties of the variables are no longer relevant with the actual series and a high degree of smoothing of the
since the estimation of the VAR coefficients will be trend series. The stochastic trend is assumed to measure
consistent even if there are unit roots (Canova, 2007) potential output, and the residual is the business cycle
2
Let Bayesian information criterion component of the output gap.

ISSN No:-2456-2165
parameter that determines the smoothness of the underlying - Trade openness : The resilience of an economy also
trend. Low values of  produce a trend close to real GDP, depends on the degree of integration with the global
while high values create an underlying trend converging to a economy. The openness of an economy is measured by
linear trend. Therefore,  also determines the length of the the ratio of imports and exports to GDP. It takes into
account that more open economies tend to be more
cycle. Low values of  will only identify high frequency vulnerable to the loss of access to external finance. Thus,
cycles and include long cycles in the trend, while higher lower levels of restrictions on external trade transactions
values of  will produce longer cycles and tend to give a tend to increase a country's ability to respond to a shock.
higher value to the output gap. In line with most of the This variable suggests that economies with high levels of
literature,  is set to 100 for annual observations. external trade are more resilient. The expected sign of the
coefficient of this variable in interaction with shocks is
Generally, the different methods can be grouped into negative.
two categories, statistical and economic. Statistical methods - Economic diversification : The Diversification Index
implicitly assume that GDP corresponds to a long-term variable was calculated from the main export products of
equilibrium component plus short-term disturbances around each country. Several indicators of economic
this trend. They decompose between the trend and the cycle diversification exist in the literature. The most widely
to isolate the trend, which is then defined as potential output. used are : i) the Ogive index which measures the deviation
Economic methods derive an estimate of potential output from an equitable distribution of employment across all
from economic supply relationships, including the sectors, ii) the normalised Herfindahl-Hirschman index
'equilibrium' value of the various components. Unlike (HHI) which allows for an assessment of the degree of
statistical methods, economic approaches base their diversification/concentration of trade and iii) the
assumptions on economic theory. However, it should be aggregate specialisation index (close to the Herfindahl-
noted that statistical filtering methods in general (the HP and Hirschman index). There is no empirical evidence of a
Baxter-King (BK) methods) are criticised for not being hierarchy concerning these three measures. Therefore, our
model-based. To address this criticism, different approaches study is limited to the Hirschman index which
have been developed to determine the potential output of an corresponds to the sum of all squared shares of each
economy. For example, the OECD has introduced an product in total national exports, and can be expressed as
alternative model-based method that takes into account a follows :
production function that includes capital, job creation, factor
N
HHI   ( xi / X ) 2
productivity and wages that do not accelerate unemployment
(Duval and Vogel, 2008). Claus (2003) also proposes an
i 1
approach based on a model involving a SVAR (Structural
vector autoregressive), in his assessment of potential output
in New Zealand. Beyond this criticism, commonly used Where xi is the nominal value of domestic exports of
filtering methods have statistical weaknesses. It is well product i, X is the nominal value of all domestic exports of
known, for example, that the HP method creates biases due to the country and N is the total number of export products. Its
the unsatisfactory treatment of parameter observations in a level of concentration depends on both the number of
sample, but this is the approach used in this work. products (or the number of markets) and the distribution of
- Terms of trade : The terms of trade are the ratio, for a shares that these products represent. This index takes values
given product, between the price index of exports and that between 0 and 1. Values close to 0 indicate perfect
of imports, expressed in the same base year. A 1% diversification and a maximum of 1 represents perfect
improvement in the terms of trade means that the growth concentration of exports, either in a single product, or to a
in the price of exports is 1% higher than the growth in the single destination country.
price of imports. It also means a deterioration in price - Foreign direct investment : In the literature, authors
competitiveness. Conversely, a decrease in the terms of generally use the stock of FDI (Daude and Stein, 2007)
trade means an improvement in price competitiveness. and the FDI to GDP ratio (Dje, 2007) to capture FDI. In
This ratio can be calculated per product, for a set of this paper, we re-examine the determinants of economic
products or globally. An improvement in the terms of resilience in SSA. This region makes very little foreign
trade is likely to reduce the importance of shocks and investment, which is why we use the FDI/GDP ratio,
increase the absorption capacity. This variable comes which represents the share of FDI inflows to SSA
from the WDI database (2018). In interaction with shocks, countries in GDP, in order to take into account the size of
its expected sign is negative. each economy.
- The exchange rate : A low real exchange rate makes it - Official Development Assistance (ODA): This is measured
possible to increase exports by competitiveness effect, by the ratio of official development assistance to GDP for
their development loosens the external constraint and each country in the sample. This variable represents the
makes it possible to import capital not produced locally, contribution of international donors from the North to
which supports growth. Conversely, a high real exchange improving the living conditions of people in the South.
rate favours the traditional sector for developing countries. Both theoretical and empirical literature has shown that
The coefficient associated with this variable must be this variable is positively related to economic resilience.
negative. This variable is taken from WDI (2018). The expected
sign of the associated coefficient is negative.

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- Government expenditure : This generally refers to total economics, especially in macroeconomics and finance, this
government expenditure and its financial operations. In method seems relevant to the analysis of the determinants of
the literature they are often considered as automatic economic resilience. It has the advantage of identifying
stabilisers in case of shocks, necessary in the recovery of unobservable effects for cross-sectional data. It controls for
fiscal policy (Hijzen et al., 2017). This indicator is the presence of unobservable heterogeneity, and provides
expressed as a percentage of gross domestic product. more robust estimators (Greene and Schlacther, 2005). The
- Financial development : In financial liberalisation system GMM estimator controls for unobserved country-
theories, financial development has gained considerable specific effects and potential endogeneity of explanatory
prominence worldwide. It reflects the abandonment of variables. There are several reasons for choosing the
policies of financial repression, deemed harmful to generalized method of moments (GMM) according to Asongu
growth, and the adoption of a policy of financial and De Moor (2017). First, the dependent variables must be
liberalisation. They show the need to remove restrictions persistent. Second, the estimation strategy takes into account
on interest rates, thereby encouraging savings and the endogeneity of all regressors. Third, cross-country
increasing the amount of financial resources available for variation is not eliminated with the estimation approach.
investment. It would be an important factor in absorbing Finally, the system GMM technique corrects for the small
shocks. One measure of financial development is the sample bias inherent in the difference estimator.
amount of bank credit allocated to the private sector,
expressed as a percentage of GDP. III. RESULTS AND DISCUSSION
- Institutions : Rodrick (1999) and Acemoglu et al (2003)
suggest that good quality institutions (stability of Table 1 below presents the results of the estimation of
government, rule of law, absence of social conflict and the basic model (equation 1.) by the GMMs on dynamic
corruption) are conducive to greater resilience. This is panels. The aim is to identify the conventional and non-
because external shocks to growth are more important the conventional factors that can explain economic resilience
more latent social conflicts are in an economy and the through their capacity to absorb common shocks. Overall, the
weaker its institutions for conflict management. model seems significant because, in accordance with the
principles of use of GMMs in a system, the AR (2) and
Given the specification of output gaps and the Hansen statistics are insignificant, thus validating the
interaction between variables and common shocks in a panel hypothesis of second-order non-correlation of the residuals
model, we use the generalized methods of moments (GMM) between the instruments and the absence of over-
proposed by Blondell and Bond (1998). Widely used in identification of restrictions.
Table 1: Estimation of the economic resilience determinants equation

(1) (2) (3) (4) (5) (6) (7) (8) (9)
(11) (10)
0.891**
L.gdp_gap 1.349*** 0.264*** 1.154*** 1.168*** 1.264*** 1.444*** 0.986*** 0.819*** 1.763*** 0.889*** *
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
1.7827** 0.996**
SHOC 7.251** 3.787*** * 6.429*** 3.938** 1.930*** 1.875*** 0.886*** 6.045*** 1.286*** *
(0.014) (0.007) (0.000) (0.006) (0.014) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Structurals
factors
TOT*SHOCS -1.185*
(0.093)
RATE*SHOC -0.464**
(0.046)
DIVER*SHO
CS 0.390***
(0.000)
TRADE*SHO
CS -1.143**
(0.043)
Macroecono
mics factors
DEP*SHOCS -0.114
(0.129)
-
FDI*SHOCS 0.333***
(0.001)
CREDIT*SH -
OCS 0.0216**

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*
(0.000)
APD*SHOCS 0.0718**
(0.045)
Institutionals
factors
Govstab*SHO -
CS 0.560***
(0.000)
Conflict*SHO
CS -0.031
(0.154)
Demo*SHOC
S 0.102
(0.203)
- - - - - - - - -
- 0.000435 0.0012** 0.00182* 0.00171* 0.00112* 0.00116* 0.00122* - 0.0012** 0.00152
Constant 0.00144* ** * ** ** * ** ** 0.0021** * ***
(0.075) (0.047) (0.001) (0.000) (0.000) (0.011) (0.007) (0.010) (0.000) (0.000) (0.006)
Country fixed
effet Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Observations 485 485 485 485 485 460 484 484 485 485 485
AR(1) 0.043 0.007 0.003 0.003 0.004 0.004 0.0153 0.008 0.004 0.007
AR(2) 0.162 0.056 0.320 0.172 0.090 0.057 0.085 0.398 0.255 0.252 0.206
sargan 0.843 0.405 0.193 0.575 0.538 0.159 0.426 0.0673 0.124 0.149 0.307
hansen 0.799 0.0598 0.380 0.837 0.523 0.402 0.585 0.848 0.239 0.893 0.609
Note: * p<0.1 ** p<0.05 *** p<0.01. Student's tally in brackets
TOT : terms of trade ; RATE : real interest rate ; DIVERS : economic diversification ; TRADE : economic openness ; DEP :
Govment expenditure ; FDI :foreign direct investment ; CREDIT : domestic investment APD : offocial development aid ;
Govstab :govment stability ; cinflict :internal conflict ; demo : democratie
Overall, when examining the resilience factors, it negative and significant sign. This suggests that the exchange
emerges that conventional factors, particularly those linked to rate is a shock absorber. Indeed, according to the literature
economic structure, favour economic resilience. Indeed, the (Collins and Razin, 1997 for example), small variations or a
absorption measured in terms of the interaction of the factor fall in real exchange rates allow for an increase in exports
considered with the common shocks is manifested by a through a competitiveness effect, their development loosens
negative sign for the interaction variable, thus translating the the external constraint and allows for the import of capital not
capacity of the factor to absorb shocks. produced locally, which favours growth. Conversely, high
real exchange rates favour the traditional sector for
As for the factors related to economic structure, the developing countries. The existence of monetary unions for
coefficient on the terms of trade is negative and significant. most SSA countries favours a certain stability of exchange
This indicates that the higher its value (i.e. when there is an rates, which constitutes a factor of absorption in the face of
appreciation or improvement in the terms of trade), the shocks.
narrower the output gap in the face of a common shock. That
is, actual output tends towards potential output. Thus, the Similarly, the coefficient of trade openness is negative
appreciation of the terms of trade, due to the increase in and significant. This negative sign of the estimate of the
exports, is a factor in the absorption of common shocks. interaction of trade openness and common shocks shows that
When they represent the most important source of economic high openness to international trade increases absorption of
fluctuations in SSA (Haffmaister et al., 1998; Sissoko and shocks by reducing the output gap, as it allows the economy
Dibooglu, 2006), their improvement is likely to reduce to benefit more from a recovery in export markets. Indeed, a
fluctuations and thus contribute to economic resilience. This high degree of trade openness is explained by an increase in
result is in fact consistent with terms-of-trade theory, trading partners and therefore an increase in exports, which
particularly for Africa (Deaton and Miller, 1996), according creates a surplus in the balance of trade necessary to maintain
to which higher relative export prices allow for greater the economy's trend in the face of shocks. Briguglio et al
purchases of production inputs and investments in (2009) showed that some small island states such as
productivity-enhancing measures, such as more efficient Singapore, which are intrinsically vulnerable to external
production technologies. shocks, were able to resist external shocks and maintain their
level of development precisely because of their trade
We also find that the coefficient associated with the openness, which favours a high concentration of exports ; as
exchange rate variable in interaction with shocks has a did Jolles et al. (2018).

ISSN No:-2456-2165
capacity that determines the rapid recovery of an economy
However, diversification in interaction with common from a negative shock is enhanced when the economy has
shocks has a positive and significant coefficient. This reflects discretionary instruments that it can use to counter the effects
a low shock absorption capacity for the latter. Indeed, one of of negative shocks, such as a strong fiscal position, which
the main characteristics of SSA countries is the low means that policymakers can use public spending to counter
diversification of their exports, which is not able to mitigate the effects of negative shocks (Briguglio et al., 2009)
the impact of shocks. It is generally accepted that diversified
economies are likely to be more resilient to shocks. With regard to institutions, the general view nowadays
is that institutions modulate and shape long-run economic
For macroeconomic factors, we find that FDI and growth trajectories defining and delimiting the context that
financial development interact with shocks with significant agents in the economic system operate in, mainly through the
coefficients and negative signs. Thus, it appears that capital definition of incentives to behave in a certain way (Acemoglu
inflows in the form of FDI, when used effectively (i.e. in the et al. 2003, 2005). Two of these unconventional determinants
presence of good institutions), increase investment, allowing are identified in these estimates (government stability and
recipient firms to better withstand shocks, thus contributing to internal conflict). Indeed, the coefficient associated with these
economic resilience. variables interacting with common shocks are significant and
show positive signs contrary to expectations. This suggests
Furthermore, financial development appears to be an that institutions are not conducive to absorbing shocks.
important factor in absorbing shocks. Indeed, the significance Generally, government institutions have always been weak,
of the coefficient associated with financial development (in with mostly corrupt and inefficient bureaucracies (Collier and
terms of credit granted to the private sector) shows the Gunning, 1999). The significance observed for these
capacity of the financial sector to direct capital towards variables reflects efforts to improve the quality of institutions,
highly profitable investments. This increases the shock which individually are still weak to respond effectively to
absorption necessary for financial stability and economic negative shocks. The interaction with other factors could be
growth. This result is in line with the literature on the subject an important factor for economic resilience.
(Levine, 1997)
Sensitivity testing
However, while public expenditure is an important In order to test the sensitivity of our results, we change
element of fiscal policy, particularly in terms of automatic our dependent variable, namely the output gap, by real GDP.
stabilisers in the event of shocks, it is marginal in helping to Indeed, following the logic of Canoval et al. (2012) and
absorb shocks in SSA countries. This can be explained by the sondermann (2018), resilience can be approximated by real
pro-cyclical tendency of fiscal policy in most SSA countries GDP, as the focus is on the occurrence of shocks. In this
and does not constitute a resilience factor in this respect. Yet respect, the impact of shocks is materialised by extreme
it is widely accepted in the literature that public spending, fluctuations in GDP. Thus the results obtained from the GDP
when used effectively, can contribute to economic stability regressions are contained in Table 2 below. Overall, the
(Besley and Persson, 2014). Moreover, the absorptive results do not change but they do vary significantly.
Table 2 : Estimation of equation (1) with GDP as the dependent variable

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
L.GDP 0.994*** 0.963*** 0.998*** 0.988*** 0.996*** 0.991*** 0.993*** 1.022*** 1.002*** 0.985*** 1.000***
(0.003) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.00351)
SHOC 7.353*** 4.912*** 1.546*** 10.36*** 4.333*** 1.796*** 1.996*** 0.827*** 3.625*** 8.606*** 1.593***
(0.007) (0.00) (0.000) (0.001) (0.002) (0.000) (0.000) (0.000) (0.000) (0.020) (0.220)
Structural factors
TOT*SHO
CS -1.274**
(0.039)
RATE*SH -
OC 0.482***
(0.000)
Diver*SHO
CS 0.262***
(0.002)
TRADE*S -
HOCS 2.100***
(0.004)
Macroeconmics
factors
DEP*SHOCS -0.146**

ISSN No:-2456-2165
(0.026)
-
FDI*SHOCS 0.348***
(0.000)
-
CREDIT*SHO 0.0221**
CS *
(0.000)
APD*SHOCS 0.151***
(0.000)
Institutionals factors
Govstab*SHO -
CS 0.217***
(0.004)
Conflict*SHO
CS -0.898**
(0.039)
Demo*SHOC
S -0.00442
(0.0615)
-
Constant 0.170* 0.898*** 0.0802** 0.331*** 0.148** 0.256** 0.209* 0.465*** 0.00449* 0.380 0.0334
(0.099) (0.000) (0.054) (0.005) (0.038) (0.041) (0.059) (0.002) (0.096) (0.319) (0.0816)
Country fixed
effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Observations 485 485 485 485 485 460 484 484 485 485 485
AR(1) 0.0132 0.014 0.011 0.006 0.002 0.003 0.004 0.008 0.008 0.022 0.006
AR(2) 0.155 0.127 0.244 0.247 0.087 0.226 0.098 0.314 0.215 0.354 0.141
sargan 0.220 0.213 0.200 0.828 0.101 0.456 0.529 0.176 0.747 0.267 0.444
hansen 0.521 0.210 0.249 0.853 0.237 0.375 0.245 0.783 0.338 0.220 0.301
Note: * p<0.1 ** p<0.05 *** p<0.01. Student's tally in brackets
Source: Author’s calculations based on World Bank (WDI), International Country Risk Guide (ICRG)
Table 2 shows that the determinants of resilience conventional determinants was identified (government
identified above are almost the same when considering GDP stability).
as a proxy for economic resilience. However, the effect of
government stability stands out as a resilience factor, In view of these results, several recommendations can
particularly in terms of absorbing the effects of shocks. be made to increase resilience in SSA countries. First,
Moreover, the reduction of internal conflicts facilitates the advocate a counter-cyclical fiscal policy to mitigate the
absorption of shocks and thus increases economic resilience effects of shocks and strengthen the governance process in
in the same way as public spending. All this shows that our African countries to improve the means of transfers between
results are robust. countries. And secondly, to encourage better management of
official development assistance through transparency. Thus,
IV. CONCLUSION all these measures could lead not only to strengthening
economic resilience in SSA countries, but also increase the
The purpose of this paper was to re-examine the region's development potential.
determinants of economic resilience in Sub-Saharan Africa.
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APPENDICES
TABLE : DESCRIPTIVE STATISTICS

Variable Observations Mean Standard error Min Max
GAP 575 0.0001948 0.0397884 -0.29579 0.180347
TOT 575 115.9732 36.37841 21.3967 251.586
RATE 575 740.867 1222.707 0.00275 9125.74
TRADE 575 68.37082 30.0072 20.7225 277.798
DIVERS 575 0.1944377 .2066725 0.0022 0.859
DEP 575 5.05e+09 1.34e+10 0.622 8.70e+10
FDI 575 3.711711 5.658216 -8.58943 50.018
CREDIT 574 18.86224 26.14199 0.491388 160.125
APD 575 6.434519 5.963238 -.0846154 40.74074
Source : Authors
Graph : Common shocs

0.035
0.030
0.025
0.020
0.015
0.010
0.005
0.000
-0.005
-0.010
-0.015
-0.020
Source : Authors
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Volume 6, Issue 6, June – 2021 International Journal of Innovative Science and Research Technology