A Politico-Economic Model for Stabilisation in Africa

Note: The following is a description of the paper and not the actual abstract. It is now generally recognised that stabilisation plans cannot be drawn up without taking potential political reactions into consideration. This has been made inevitable by the unfortunate experience of countries where serious socio-political disturbances have been provoked by stabilisation measures, with the overall result of delaying the necessary reforms. In this paper, we develop a politico-economic model tailored to developing countries, which enables us to analyse the interactions between economic and political measures and events during stabilisation, as well as the role of political and economic factors in the design of government policy. This model, composed of 18 simultaneous equations, is tested on 23 African countries in the 1980's, using a data set of political variables constructed for this purpose. The results are conclusive. We provide strong econometric support for the view that policy instruments and macroeconomic outcomes respond to the political objectives of governments, who must trade-off between internal and external pressures. Such behaviour shows that, even though the majority of the African regimes examined are autocratic, they can not maintain strong political repression to suppress opposition, and are finally obliged to modify the original design of the stabilisation plans. We conclude that incorporating socio-political reactions in the design of economic policies can help establish more efficient stabilisation programs