Global Macroeconomic Models and African Trade and Finance: A Survey of the Literature

Abstract

The trade and finance problems of Africa have been extensively examined from both theoretical and empirical angles. In this survey, an attempt is made to locate these problems within a global economy context. This is important for two main reasons. Firstly, it helps one to identify the position of Africa within the world economy. Secondly, it allows one to assess the extent to which Africa’s entry into the world economy represents an obstacle to development efforts being undertaken in that continent. The purpose of the contribution of this paper is to review the literature on global modelling. An attempt will be made to examine both the theoretical and practical efforts at modelling the South within a North-South framework. The main conclusion is that the North receives a lot of interest and the developing countries are poorly modelled despite the recent efforts. The study is organized as follows. Section 1.2 sketches the broader theoretical framework within which most current North-South models fall. In section 1.3 some of the more important of the existing North-South models are examined. Based on this review, section 1.4 attempts to draw out a number of lessons for improving the modelling of the South. These lessons form the basis for the development of an alternative North-South model focusing specifically on Africa. This model is fully developed in section 1.5. Section 1.5 will have for main components: A compressed model of African trading partners (the North), a compressed model of OPEC, and a compressed model of ‘International Banking, and a prototype African (the South) Macro Model.