Exchange rate misalignment, state fragility, and economic growth in sub-Saharan Africa

Figures & data

Table 1. First-generation panel stationarity tests

		Levin-Lin-Chu	Im-Pesaran-Shin	Harris-Tzavalis
log Real exchange rate	Levels	−2.411***	−1.662	1.214
	1st ∆		−4.835***	−7.382***
	Integration	I(0)	I(1)	I(1)
Capital inflows	Levels	0.338	−0.663	0.318
	1st ∆	−2.837***	−5.821***	−7.043***
	Integration	I(1)	I(1)	I(1)
Technological Progress	Levels	−0.110	−0.219	1.411
	1st ∆	−9.339***	−6.154***	−8.713***
	Integration	I(1)	I(1)	I(1)
Trade openness	Levels	0.331	−1.384	0.501
	1st ∆	−7.114***	−4.009***	−5.811***
	Integration	1(1)	I(1)	I(1)
Government consumption	Levels	−0.229	−1.304	1.338
	1st ∆	−7.289***	−5.001***	−8.449***
	Integration	I(1)	I(1)	I(1)
log terms of trade	Levels	−0.971	−1.158	2.115
	1st ∆	−5.553***	−6.330***	−5.391***
	Integration	I(1)	I(1)	I(1)

Table 2. Second-generation panel stationarity tests

		Pesaran	Breitung	Hadri
log Real exchange rate	Levels	−1.263	0.116	8.117***
	1st ∆	−5.061***	−7.005***	0.1331
	Integration	I(1)	I(1)	I(1)
Capital inflows	Levels	−0.022	3.511	6.401***
	1st ∆	−5.133***	−2.553***	0.133
	Integration	I(1)	I(1)	I(1)
Technological Progress	Levels	−1.554	1.262	7.018***
	1st ∆	−3.837***	−4.833***	1.516
	Integration	I(1)	I(1)	I(1)
Trade openness	Levels	3.891***	−0.291	5.003***
	1st ∆		−6.033***	−0.228
	Integration	1(0)	I(1)	I(1)
Government consumption	Levels	−1.438	1.184	5.336***
	1st ∆	−4.533***	−5.100***	1.409
	Integration	I(1)	I(1)	I(1)
log terms of trade	Levels	6.036***	−0.330	7.814***
	1st ∆		−8.291***	−0.119
	Integration	1(0)	I(1)	I(1)

Table 3. Pedroni test for cointegration

Alternative hypothesis: common AR coefficients. (within-dimension)
				Weighted
		Statistic	Prob.	Statistic	Prob.
Panel v-Statistic		−0.434593	0.6681	−1.042622	0.8514
Panel rho-Statistic		−3.676536	0.0001***	−1.942845	0.0260**
Panel PP-Statistic		−11.96667	0.0000***	−7.573549	0.0000***
Panel ADF-Statistic		−5.837496	0.0000***	−3.928122	0.0000***
Alternative hypothesis: individual AR coefficients. (between-dimension)
		Statistic	Prob.
Group rho-Statistic		−1.604303	0.0543*
Group PP-Statistic		−10.37321	0.0000***
Group ADF-Statistic		−5.025131	0.0000***

Table 4. Westerlund test for cointegration

Statistic	Value	Z-value	P-value
Gt	−3.477	−4.229	0.000***
Ga	14.470	−2.611	0.005***
Pt	−10.535	−5.577	0.000***
Pa	−17.888	−5.282	0.000***

Table 5. Kao test for cointegration

			t-Statistic	Prob.
ADF			−4.548115	0.0000***
Residual variance			0.000793
HAC variance			0.000275

Table 6. Johansen and Fischer test for cointegration

Hypothesized	Fisher Stat.*		Fisher Stat.*
No. of CE(s)	(from trace test)	Prob.	(from max-eigen test)	Prob.
None	67.54	0.0000	44.78	0.0000***
At most 1	27.58	0.0064	27.58	0.0064**
At most 2	15.38	0.1131	18.11	0.1124

Table 7.: Equilibrium real exchange rate model

Variables	Coefficients
Capital Inflows	0.113*** (0.032)
Technological Progress	−0.371* (0.182)
Trade Openness	−0.031 (0.116)
Government Consumption	−0.0089** (0.003)
log (Terms of Trade)	0.076*** (0.029)
Constant	9.653 (1.891)
Observations	117
Prob > F	0.0019

Standard errors in parentheses

*** p < 0.01, ** p < 0.05, *** p < 0.1

Table 8. Endogeneity and cross-sectional dependence

Test	Test statistic	p-value
Durbin Score chi2(1)	5.24	0.0410
Wu-Hausman	5.24	0.0193
Pesaran CD	0.97	0.3340
Breusch-Pagan LM	1.18	0.8161
Scaled Breusch-Pagan LM	0.055	0.9533
Bias-corrected scaled LM	0.031	0.9602

Table 9.: Misalignment, state fragility, and growth

Variables	(1)	(2)	(3)	(4)
Initial income	−0.776**	−0.696**	−0.742**	−0.647**
	(0.312)	(0.327)	(0.330)	(0.328)
SFI	−0.0274*	−0.0344**	−0.0785***	−0.0769***
	(0.0161)	(0.0148)	(0.0202)	(0.0197)
mis	−0.104***	−0.426***	−0.417***	−0.434***
	(0.0313)	(0.0781)	(0.0865)	(0.0838)
mis $\times$ SFI		−0.0262***	−0.0221***	−0.0235***
		(0.00591)	(0.00613)	(0.00595)
Government cons			−0.104*	−0.0983*
			(0.0594)	(0.0569)
Investment			0.0993***	0.0740***
			(0.0179)	(0.0286)
Urbanization			−0.0810***	−0.0719**
			(0.0289)	(0.0280)
Inflation			−0.0997***	−0.113*
			(0.0210)	(0.0668)
Trade			0.0781* (0.042)	0.0773* (0.041)
log TOT			0.0577***	0.0513***
			(0.0163)	(0.0159)
Constant	0.0799*	0.110***	0.0227	0.415***
	(0.0419)	(0.0390)	(0.0941)	(0.011)
Observations	104	104	104	104
Number of ID	13	13	13	13
Time dummies	no	no	no	yes
Arellano & Bond AR (1)	0.0311	0.0225	0.0416	0.0271
Arellano & Bond AR (2)	0.5155	0.4313	0.3292	0.6183
Sargan test	0.5181	0.2791	0.6247	0.4816

Standard errors in parentheses

*** p < 0.01, ** p < 0.05, *** p < 0.1