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African Development Bank

A review of ex-ante poverty impact assessments of macroeconomic policies in Cameroon and Ghana

Economic Research Working Paper No 86

Nicholas Adamtey, Vitus Azeem and Samuel Fambon
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Integrated Social Development Centre (ISODEC) and University of Yaoundé II

African Development Bank

July 2006

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Cameroon and Ghana went through a series of stabilization and structural adjustment programs in the 1980s and 1990s that implied considerable changes to a broad range of macroeconomic polices. However, in terms of poverty reduction, little has been achieved, except more recently in Ghana. While some claim that macroeconomic stabilization has gone too far, others maintain that changes in macroeconomic policies have not gone far enough. Even though it is clear today that the developmental challenges facing most developing countries are cross-cutting and need a comprehensive set of macroeconomic, sectoral and social policies, macroeconomic policies continue to be at the center of the debate.

One reason for the disagreement on what poverty-reducing macroeconomic policies are is that too little has been done in terms of evaluating the impact of macroeconomic polices on poverty. The impacts of macroeconomic policies are often ignored. Even when they are considered these are often afterthoughts and/or addressed in an isolated way. This is not satisfactory, especially in an era of international commitments to achieve the Millennium Development Goals (MDGs) and the emergence of a new development paradigm in which policy interventions are supposed to be based on country-owned poverty reduction strategies. It is important to be able to assess the impacts of macroeconomic policies on the poor early enough so as to change the design of the policy or to put in place compensatory policies to alleviate any adverse effects that may have resulted.

The substantial disagreements on the impact of macroeconomic policies on poverty have led to some accord on the need for ex-ante impact assessments of macroeconomic polices. A variety of researchers have developed a series of tools, models, networks, etc. for such impact assessments. This paper summarizes the experience with ex-ante assessments of macroeconomic policies in Cameroon and Ghana during the last ten years, including lessons that could be useful for other developing countries.

Many studies analyze macroeconomic policies without making any explicit linkage to poverty. Similarly, there are many poverty studies that do not make any explicit link to macroeconomic policies. In the cases of Cameroon or Ghana, there are fewer than 20 studies that can be considered to contain some elements of an ex-ante poverty impact assessment of macroeconomic policies. Together, they only scratch the surface of an increasingly sophisticated topic that is central to reducing poverty and meeting the MDGs.1

The findings of this paper are expected to encourage policy makers to review macroeconomic policies by promoting a more pro-poor policy environment based on credible analysis of available options. It also intends to contribute towards overcoming the various constraints to conducting ex-ante poverty impact assessments of macroeconomic policies.

The paper is organized into six sections. Following this introduction, Section 2 looks at studies that are of a macroeconomic nature (mostly macroeconomic forecasting models). Section 3 reviews some specific studies that constitute ex-ante poverty impact assessments of macroeconomic policies in Cameroon or Ghana. The most comprehensive models that have been developed and applied for the ex-ante poverty impact assessment of macroeconomic policies in at least one country are then presented in Section 4. Section 5 provides some discussion on the institutional environment of ex-ante poverty impact assessments in Cameroon and Ghana, before the last Section (Section 6) provides the conclusion and some recommendations.

  1. See Gunter, Cohen and Lofgren (2005) for an overview of analyzing macro-poverty linkages and Robinson and Lofgren (2005) for a review of the main tools for such an analysis, consisting mainly of economy-wide, multi-sectoral models. Kraev and Akolgo (2005) provide a set of desirable properties of an adequate model for assessing distributional impacts of macroeconomic policy packages, and use these as criteria to evaluate four model types commonly used for such assessments, namely, fixed ratio, econometric, computable general equilibrium (CGE) and micro-simulation models, of which CGE models perform the best on most criteria, in spite of their substantial flaws of non-verifiability and lack of shortterm analysis. Finally, Savard (2005) compares two of the most recent approaches used for ex-ante poverty impact assessments of macroeconomic policies: the traditional representative agent and the microsimulation approach.

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