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Abera Gelan

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Papers by Abera Gelan

Black market exchange rate and the productivity bias hypothesis

Economics Letters, May 1, 2006

Previous studies that tested the productivity bias hypothesis employed the official nominal excha... more Previous studies that tested the productivity bias hypothesis employed the official nominal exchange rate in constructing the real rate, hence, in testing the productivity bias hypothesis. In this paper we show that if official real exchange rate does not support the productivity bias hypothesis, the real black market rate does. This conjecture is tested by using data from Chile, Colombia and Costa Rica.

The Monopoly Power of Multinational Enterprises in the Service Sector of a Developing Country

Journal of Developing Areas, 2008

This paper draws attention to the implications of multinational enterprises (MNEs) investment in ... more This paper draws attention to the implications of multinational enterprises (MNEs) investment in the nontraded sector of a developing host country when their investment is characterized by the transmission of superior technology, but also draws on the local capital market to secure factors of production. In a simple general equilibrium model, we show that once the MNEs control the nontraded sector, their activities generate disturbing results for the host country's economy. In particular, the host country may experience reduced total employment and real national income as a result of their investment. The cause for such unsettling outcomes is directly related to the MNEs utilization of their sector-specific stock of knowledge-based assets in the production of nontraded goods.

On the Relation between Nominal Devaluation and Real Devaluation: Evidence from African Countries

Social Science Research Network, Mar 1, 2007

A country devalues its currency with an expectation that it will gain international competitivene... more A country devalues its currency with an expectation that it will gain international competitiveness and increase its exports. However, the inflationary effects of devaluation could curtail its favourable effects unless nominal devaluation leads to real devaluation. In this paper, we consider the experiences of 21 African countries. After constructing the real and nominal effective exchange rates over the 1971I–2004III period,

Exchange rate volatility and international trade: A general-equilibrium analysis

European Economic Review, 2003

We analyze the relation between exchange-rate volatility and the volume of international trade, i... more We analyze the relation between exchange-rate volatility and the volume of international trade, in a general-equilibrium stochastic-endowment economy with imperfect international commodity markets, and treating both variables as endogenous. Even in the simplest model, the sign of the relation depends on the source for the change in volatility. For instance, more volatility of the endowments and higher costs to international trade both boost exchange risk (and lower welfare); but the ÿrst increases the expected volume of trade, while the second decreases trade. Note that even the (inter-equilibria) relation between trade and welfare is ambiguous.

1 Inward Foreign Direct Investment and Racial Employment Patterns in U.S. Manufacturing

By Abera Gelan, Kaye Husbands Fealing and James Peoples * This study uses several data sources to... more By Abera Gelan, Kaye Husbands Fealing and James Peoples * This study uses several data sources to predict the effect of foreign direct investment (FDI) activity on racial employment patterns. Findings indicate that FDI is associated with an improved probability of black employment in high-wage and mid-level wage jobs versus low wage jobs. FDI does not influence racial employment disparity for low-wage versus mid-level wage jobs. These findings are interpreted to suggest that enhanced competition for U.S. workers creates a business environment that can provide greater job opportunities for individuals from groups traditionally under-represented in hig-paying occupations.

Session Title: Globalization and Economic Outcomes for Minority Groups

Authors: Abera Gelan, Department of Africology, Mitchell Hall, University of Wisconsin-Milwaukee,... more Authors: Abera Gelan, Department of Africology, Mitchell Hall, University of Wisconsin-Milwaukee, P.O. Box 413, Milwaukee, WI 53201-0413; Phone: (414) 229-4144; Fax: (414) 229-4607; email: [email protected]; Kaye Husbands Fealing, Department of Economics, Morey House, Williams College, Williamstown, MA 01267; Phone: (703) 292-7267; Fax: (703) 292-9083; e-mail: [email protected] James Peoples, Department of Economics, Bolton Hall, Room 808, University of WisconsinMilwaukee, P.O. Box 413, , Milwaukee, WI 53201-0413; Phone: (414) 229-4482; Fax: (414) 229-3860; e-mail: [email protected](CORRESPONDING AUTHOR)

The South Africa‐U.S. Trade and the Real Exchange Rate: Asymmetric Evidence from 25 Industries

South African Journal of Economics, 2019

Previous studies that assessed the effects of exchange rate changes on the trade balance of South... more Previous studies that assessed the effects of exchange rate changes on the trade balance of South Africa assumed that the effects are symmetric. In this paper we violate that assumption and assess the asymmetric effects of the real rand-dollar rate on the trade balance of 25 2-digit industries that trade between South Africa and the U.S. We find short-run asymmetric effects in a total of 19 industries but short-run cumulative or impact asymmetric effects only on five industries. Shortrun asymmetric effects lasted into long-run asymmetric effects on 14 industries. Further analysis revealed industries that will benefit from rand depreciation and those that will be hurt from rand appreciation.

Asymmetric effects of exchange rate changes on the demand for money in Africa

Applied Economics, 2019

ABSTRACT In order to account for currency substitution, the exchange rate is included in the dema... more ABSTRACT In order to account for currency substitution, the exchange rate is included in the demand for money. More recent studies have demonstrated that exchange rate changes could have asymmetric effects on the demand for money or domestic currency. In this paper, we consider the experiences of 18 African countries and show that in most countries, indeed exchange rate changes have short-run asymmetric effects on the demand for money. However, short-run effects translate to long-run asymmetric effects only in a limited number of African countries.

Non-linear quantile unit root test and PPP: more evidence from Africa

Applied Economics Letters, 2017

It is now a common practice to establish stationarity of the real exchange rate as a sign of purc... more It is now a common practice to establish stationarity of the real exchange rate as a sign of purchasing power parity (PPP) hypothesis. In this article, we consider the real effective exchange rates of 29 African countries. When we apply conventional linear unit root tests, we find support for the PPP in eight countries. However, when we shift to the newly introduced non-linear quantile unit root test, support for the PPP increases to 15 countries.

On the relation between income distribution and economic growth

Global Business and Economics Review, 2012

ABSTRACT

Testing the PPP in the non-linear STAR Framework: Evidence from Africa

Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reve... more Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reverting process of a time series variable has gained momentum in testing the Purchasing Power Parity (PPP) theory. A few studies have applied the new test to the real bilateral exchange rates and have shown that it supports the PPP more often than the standard ADF test. In this paper we apply the new test as well as the standard ADF test not to real bilateral exchange rates but to real effective exchange rates of 21 African nations and show that indeed, the PPP is validated in 11 out of 21 African countries.

Testing PPP in the non-linear STAR framework

Economics Letters, 2007

Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reve... more Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reverting process of a time series variable has gained momentum in testing the Purchasing Power Parity (PPP) theory. A few studies have applied the new test to the real bilateral exchange rates and have shown that it supports the PPP more often than the standard ADF test. In this paper we apply the new test as well as the standard ADF test not to real bilateral exchange rates but to real effective exchange rates of 21 African nations and show that indeed, the PPP is validated in 11 out of 21 African countries.

Inward Foreign Direct Investment and Racial Employment Patterns in US Manufacturing

The American Economic Review, May 1, 2007

THE EFFECTS OF MULTINATIONAL ENTERPRISES INVESTMENT IN THE NONTRADED SECTOR OF DEVELOPING ECONOMIES

This paper draws attention to the implications of multinational enterprises (MNEs) investment in ... more This paper draws attention to the implications of multinational enterprises (MNEs) investment in the nontraded sector of a developing host country when their investment is characterized by the transmission of superior technology, but also draws on the local capital market to secure factors of production. In a simple general equilibrium model, we show that once the MNEs control the nontraded sector, their activities generate disturbing results for the host country's economy. In particular, the host country may experience reduced total employment and real national income as a result of their investment. The cause for such unsettling outcomes is directly related to the MNEs utilization of their sector-specific stock of knowledge-based assets in the production of nontraded goods.

The Monopoly Power of Multinational Enterprises in the Service Sector of a Developing Country

Journal of Developing Areas, 2009

This paper draws attention to the implications of the foreign direct investment (FDI) in the pres... more This paper draws attention to the implications of the foreign direct investment (FDI) in the presence of monopoly power of multinational enterprises (MNEs) in the industries that are natural monopolies of a developing host country. We also take into account the MNEs&amp;amp;#39; behavior that relies on the local capital market in order to finance their FDI. In a simple general

Inward Foreign Direct Investment and Racial Employment Patterns in US Manufacturing

American Economic Review, 2007

How stable is the demand for money in African countries?

Journal of Economic Studies, 2009

Purpose – Studies that have addressed the stability of the demand for money in African countries ... more Purpose – Studies that have addressed the stability of the demand for money in African countries are rare. A few papers have addressed the issue in a small number of individual countries. For cross-country comparison, this paper aims to investigate the stability of the M2 demand for money in 21 African countries using quarterly data over the period 1971Q1-2004Q3. Design/methodology/approach – A standard money demand function is designed. It is estimated using a bounds testing approach to co-integration and error-correction modeling. Findings – Application of the CUSUM and CUSUMSQ tests to the residuals of error-correction models reveals that in almost all 21 countries, M2 demand for money is stable. This could be due to incorporating the short-run adjustment process in testing for the stability of the long-run elasticity estimates. Research limitations/implications – Due to data limitations, the study could not be extended to all countries in Africa. Originality/value – This is the most comprehensive study in the literature for Africa.

Is there J-Curve effect in Africa?

International Review of Applied Economics, 2012

The J-Curve is a term used to describe the post-devaluation behavior of the trade balance, i.e., ... more The J-Curve is a term used to describe the post-devaluation behavior of the trade balance, i.e., initial deterioration followed by an improvement. Previous research has tested the phenomenon for many developed and developing countries. However, African nations have not received any attention on this regard. In this paper, we test the hypothesis for nine African countries of Burundi, Egypt, Kenya,

Are Devaluations Contractionary in Africa?

Global Economic Review, 2013

ABSTRACT

Black market exchange rate and the productivity bias hypothesis

Economics Letters, 2006

Previous studies that tested the productivity bias hypothesis employed the official nominal excha... more Previous studies that tested the productivity bias hypothesis employed the official nominal exchange rate in constructing the real rate, hence, in testing the productivity bias hypothesis. In this paper we show that if official real exchange rate does not support the productivity bias hypothesis, the real black market rate does. This conjecture is tested by using data from Chile, Colombia and Costa Rica. D

Black market exchange rate and the productivity bias hypothesis

Economics Letters, May 1, 2006

Previous studies that tested the productivity bias hypothesis employed the official nominal excha... more Previous studies that tested the productivity bias hypothesis employed the official nominal exchange rate in constructing the real rate, hence, in testing the productivity bias hypothesis. In this paper we show that if official real exchange rate does not support the productivity bias hypothesis, the real black market rate does. This conjecture is tested by using data from Chile, Colombia and Costa Rica.

The Monopoly Power of Multinational Enterprises in the Service Sector of a Developing Country

Journal of Developing Areas, 2008

This paper draws attention to the implications of multinational enterprises (MNEs) investment in ... more This paper draws attention to the implications of multinational enterprises (MNEs) investment in the nontraded sector of a developing host country when their investment is characterized by the transmission of superior technology, but also draws on the local capital market to secure factors of production. In a simple general equilibrium model, we show that once the MNEs control the nontraded sector, their activities generate disturbing results for the host country's economy. In particular, the host country may experience reduced total employment and real national income as a result of their investment. The cause for such unsettling outcomes is directly related to the MNEs utilization of their sector-specific stock of knowledge-based assets in the production of nontraded goods.

On the Relation between Nominal Devaluation and Real Devaluation: Evidence from African Countries

Social Science Research Network, Mar 1, 2007

A country devalues its currency with an expectation that it will gain international competitivene... more A country devalues its currency with an expectation that it will gain international competitiveness and increase its exports. However, the inflationary effects of devaluation could curtail its favourable effects unless nominal devaluation leads to real devaluation. In this paper, we consider the experiences of 21 African countries. After constructing the real and nominal effective exchange rates over the 1971I–2004III period,

Exchange rate volatility and international trade: A general-equilibrium analysis

European Economic Review, 2003

We analyze the relation between exchange-rate volatility and the volume of international trade, i... more We analyze the relation between exchange-rate volatility and the volume of international trade, in a general-equilibrium stochastic-endowment economy with imperfect international commodity markets, and treating both variables as endogenous. Even in the simplest model, the sign of the relation depends on the source for the change in volatility. For instance, more volatility of the endowments and higher costs to international trade both boost exchange risk (and lower welfare); but the ÿrst increases the expected volume of trade, while the second decreases trade. Note that even the (inter-equilibria) relation between trade and welfare is ambiguous.

1 Inward Foreign Direct Investment and Racial Employment Patterns in U.S. Manufacturing

By Abera Gelan, Kaye Husbands Fealing and James Peoples * This study uses several data sources to... more By Abera Gelan, Kaye Husbands Fealing and James Peoples * This study uses several data sources to predict the effect of foreign direct investment (FDI) activity on racial employment patterns. Findings indicate that FDI is associated with an improved probability of black employment in high-wage and mid-level wage jobs versus low wage jobs. FDI does not influence racial employment disparity for low-wage versus mid-level wage jobs. These findings are interpreted to suggest that enhanced competition for U.S. workers creates a business environment that can provide greater job opportunities for individuals from groups traditionally under-represented in hig-paying occupations.

Session Title: Globalization and Economic Outcomes for Minority Groups

Authors: Abera Gelan, Department of Africology, Mitchell Hall, University of Wisconsin-Milwaukee,... more Authors: Abera Gelan, Department of Africology, Mitchell Hall, University of Wisconsin-Milwaukee, P.O. Box 413, Milwaukee, WI 53201-0413; Phone: (414) 229-4144; Fax: (414) 229-4607; email: [email protected]; Kaye Husbands Fealing, Department of Economics, Morey House, Williams College, Williamstown, MA 01267; Phone: (703) 292-7267; Fax: (703) 292-9083; e-mail: [email protected] James Peoples, Department of Economics, Bolton Hall, Room 808, University of WisconsinMilwaukee, P.O. Box 413, , Milwaukee, WI 53201-0413; Phone: (414) 229-4482; Fax: (414) 229-3860; e-mail: [email protected](CORRESPONDING AUTHOR)

The South Africa‐U.S. Trade and the Real Exchange Rate: Asymmetric Evidence from 25 Industries

South African Journal of Economics, 2019

Previous studies that assessed the effects of exchange rate changes on the trade balance of South... more Previous studies that assessed the effects of exchange rate changes on the trade balance of South Africa assumed that the effects are symmetric. In this paper we violate that assumption and assess the asymmetric effects of the real rand-dollar rate on the trade balance of 25 2-digit industries that trade between South Africa and the U.S. We find short-run asymmetric effects in a total of 19 industries but short-run cumulative or impact asymmetric effects only on five industries. Shortrun asymmetric effects lasted into long-run asymmetric effects on 14 industries. Further analysis revealed industries that will benefit from rand depreciation and those that will be hurt from rand appreciation.

Asymmetric effects of exchange rate changes on the demand for money in Africa

Applied Economics, 2019

ABSTRACT In order to account for currency substitution, the exchange rate is included in the dema... more ABSTRACT In order to account for currency substitution, the exchange rate is included in the demand for money. More recent studies have demonstrated that exchange rate changes could have asymmetric effects on the demand for money or domestic currency. In this paper, we consider the experiences of 18 African countries and show that in most countries, indeed exchange rate changes have short-run asymmetric effects on the demand for money. However, short-run effects translate to long-run asymmetric effects only in a limited number of African countries.

Non-linear quantile unit root test and PPP: more evidence from Africa

Applied Economics Letters, 2017

It is now a common practice to establish stationarity of the real exchange rate as a sign of purc... more It is now a common practice to establish stationarity of the real exchange rate as a sign of purchasing power parity (PPP) hypothesis. In this article, we consider the real effective exchange rates of 29 African countries. When we apply conventional linear unit root tests, we find support for the PPP in eight countries. However, when we shift to the newly introduced non-linear quantile unit root test, support for the PPP increases to 15 countries.

On the relation between income distribution and economic growth

Global Business and Economics Review, 2012

ABSTRACT

Testing the PPP in the non-linear STAR Framework: Evidence from Africa

Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reve... more Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reverting process of a time series variable has gained momentum in testing the Purchasing Power Parity (PPP) theory. A few studies have applied the new test to the real bilateral exchange rates and have shown that it supports the PPP more often than the standard ADF test. In this paper we apply the new test as well as the standard ADF test not to real bilateral exchange rates but to real effective exchange rates of 21 African nations and show that indeed, the PPP is validated in 11 out of 21 African countries.

Testing PPP in the non-linear STAR framework

Economics Letters, 2007

Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reve... more Since its introduction in 2003, a new unit-root test that incorporates non-linearity in mean reverting process of a time series variable has gained momentum in testing the Purchasing Power Parity (PPP) theory. A few studies have applied the new test to the real bilateral exchange rates and have shown that it supports the PPP more often than the standard ADF test. In this paper we apply the new test as well as the standard ADF test not to real bilateral exchange rates but to real effective exchange rates of 21 African nations and show that indeed, the PPP is validated in 11 out of 21 African countries.

Inward Foreign Direct Investment and Racial Employment Patterns in US Manufacturing

The American Economic Review, May 1, 2007

THE EFFECTS OF MULTINATIONAL ENTERPRISES INVESTMENT IN THE NONTRADED SECTOR OF DEVELOPING ECONOMIES

This paper draws attention to the implications of multinational enterprises (MNEs) investment in ... more This paper draws attention to the implications of multinational enterprises (MNEs) investment in the nontraded sector of a developing host country when their investment is characterized by the transmission of superior technology, but also draws on the local capital market to secure factors of production. In a simple general equilibrium model, we show that once the MNEs control the nontraded sector, their activities generate disturbing results for the host country's economy. In particular, the host country may experience reduced total employment and real national income as a result of their investment. The cause for such unsettling outcomes is directly related to the MNEs utilization of their sector-specific stock of knowledge-based assets in the production of nontraded goods.

The Monopoly Power of Multinational Enterprises in the Service Sector of a Developing Country

Journal of Developing Areas, 2009

This paper draws attention to the implications of the foreign direct investment (FDI) in the pres... more This paper draws attention to the implications of the foreign direct investment (FDI) in the presence of monopoly power of multinational enterprises (MNEs) in the industries that are natural monopolies of a developing host country. We also take into account the MNEs&amp;amp;#39; behavior that relies on the local capital market in order to finance their FDI. In a simple general

Inward Foreign Direct Investment and Racial Employment Patterns in US Manufacturing

American Economic Review, 2007

How stable is the demand for money in African countries?

Journal of Economic Studies, 2009

Purpose – Studies that have addressed the stability of the demand for money in African countries ... more Purpose – Studies that have addressed the stability of the demand for money in African countries are rare. A few papers have addressed the issue in a small number of individual countries. For cross-country comparison, this paper aims to investigate the stability of the M2 demand for money in 21 African countries using quarterly data over the period 1971Q1-2004Q3. Design/methodology/approach – A standard money demand function is designed. It is estimated using a bounds testing approach to co-integration and error-correction modeling. Findings – Application of the CUSUM and CUSUMSQ tests to the residuals of error-correction models reveals that in almost all 21 countries, M2 demand for money is stable. This could be due to incorporating the short-run adjustment process in testing for the stability of the long-run elasticity estimates. Research limitations/implications – Due to data limitations, the study could not be extended to all countries in Africa. Originality/value – This is the most comprehensive study in the literature for Africa.

Is there J-Curve effect in Africa?

International Review of Applied Economics, 2012

The J-Curve is a term used to describe the post-devaluation behavior of the trade balance, i.e., ... more The J-Curve is a term used to describe the post-devaluation behavior of the trade balance, i.e., initial deterioration followed by an improvement. Previous research has tested the phenomenon for many developed and developing countries. However, African nations have not received any attention on this regard. In this paper, we test the hypothesis for nine African countries of Burundi, Egypt, Kenya,

Are Devaluations Contractionary in Africa?

Global Economic Review, 2013

ABSTRACT

Black market exchange rate and the productivity bias hypothesis

Economics Letters, 2006

Previous studies that tested the productivity bias hypothesis employed the official nominal excha... more Previous studies that tested the productivity bias hypothesis employed the official nominal exchange rate in constructing the real rate, hence, in testing the productivity bias hypothesis. In this paper we show that if official real exchange rate does not support the productivity bias hypothesis, the real black market rate does. This conjecture is tested by using data from Chile, Colombia and Costa Rica. D