electoral democracy and inflation in africa

UPDATE: A related paper is here. [HT Julie]

Central bank independence is still the exception rather than the rule in most of Africa. This then raises the question of what effects elections – with the high associated costs of buying votes – have on the inflation rate.

For instance, Uganda has been experiencing inflation (a.k.a walk to work) riots following Museveni’s reelection. Many in Uganda and beyond have attributed the hike in the cost of living not just to global trends (food and oil prices) but also to Museveni’s massive reelection budget. Just before the Ugandan elections in February the president doled out cash like he was “printing his own money.”

Next door in Kenya rumors abound that the recent hike in oil prices, the failure to resettle IDPs and other forms of grand corruption are related to politicians amassing a war chest for next year’s general election.

This raises the question: Is there a correlation between election years and inflation in Africa?

My first stab at this reveals rather weak correlations between election years and trends in inflation rates in a number of African states. (Shown below are Kenya, Uganda and Tanzania, Senegal). The vertical dotted lines indicate election years.

In the regressions different lags produce different results.

That said, it appears that competitive elections are significantly correlated with hikes in the inflation rates for up to three years (elections are “competitive” if the incumbent gets less than 2/3 of the vote).

Given the fact that Museveni’s vote share was trending downward in 1995, 2001 and 2006 (75%, 69% and 59% respectively), the NRM leader must have panicked and opened the floodgates for this past election.

Election monitoring and international sanctions against cheating have made the stealing of elections a very costly endeavor. But politicians are smart. If you can’t stuff the ballot boxes you can certainly intimidate voters or buy them off.

My hope is that with time the buying off of voters option will become institutionalized and made impartial to party ID.

togo goes to the polls

Togo, a tiny West African country of 6.6 million, goes to the polls today. Faure Gnassingbe, President of Togo and son of the late strongman Gnassingbe Eyadema, is hoping to be re-elected for a second term. His father ruled the country uninterrupted between 1967 until his death in 2005. The younger Gnassingbe was then installed by the military as interim president before elections were held. Most observers believe that these elections were not free and fair. Many hope that this time round things will be different.Yeah right.

African democracy’s teething problems will not go away just yet. 2010’s busy elections schedule will surely bring some of these problems to the fore. The top four to watch include the elections in Rwanda, Ethiopia, Madagascar and Ivory Coast. Paul Kagame will most certainly win in Rwanda, but the question is how much room he will give the opposition this time round. Mr.Kagame has been president since his forces ended the Rwanda genocide in 1994 and has been touted to be among the more economically liberal strongmen on the Continent (he is no Tutu but he is good for business). In Ethiopia Meles Zenawi’s party, Ethiopian People’s Revolutionary Democratic Front (EPRDP), is also expected to win. Mr. Zenawi has been in power since he deposed the tin pot despot Mengistu Haile Mariam in 1991. Here too it remains unclear just how much opposition Mr. Zenawi will tolerate in parliament.

Madagascar, as you may remember had a coup in March of last year. It will be interesting to see who emerges as winner in this election. The contest is between the factions led by former DJ and mayor of Antananarivo Andry Rajoelina and the man he kicked out of office Marc Ravalomanana.The political instability in this island country off the east coast of the Continent has not gone without economic consequences.

Ivory Coast, once a paragon of stability in West Africa, is also holding elections this year. This year’s polls were originally planned to be held in 2005 before a bloody civil war that divided the country in half got in the way. The land of Houphouet-Boigny has not known peace and stability since the strongman’s passing in 1993. Mr. Houphouet-Boigny was president between 1963 until his death in 1993. Among his accomplishments was the relocation of the capital of Ivory Coast to Yamoussoukro, his home town, and the construction there of the US $ 300 million Basilica of Our Lady of Peace (which the Guinness Books of records lists as the largest church in the world).