From macroeconomic stabilization to medium-term growth in sub-saharan africa: some lessons from world bank-supported adjustment programs

Using a methodology that allows for endogenizing the participation decisions on World Bank adjustment lending programs, as well as for testing the validity of the maintained assumptions regarding program participation, this paper studies the effectiveness of these programs in Sub-Saharan Africa (SSA). The evidence of this paper show that adjustment programs in SSA have had no statistically significant effect on growth in the second half of the 1980s compared to the first half. But they have had a significant and deleterious effect on investment between the two periods. The results also show that adjustment lending programs have contributed significantly to improved export performance in Sub-Saharan Africa, at least relative to nonadjusting African countries. These findings imply that the perceived improvements on export competitiveness and on the efficiency of investment—supposed to be generated by the reform programs—has not been sufficient, to counterbalance the ensuing decline in investment, and hence to restore economic growth in SSA. However, an important qualification to the above results—which is also a point of departure for future research—is that the paper's methodology for classifying countries into adjusting and non-adjusting does not explicitly allow for the degree of implementation. Therefore, strictly speaking, the findings of this paper are in fact an assessment of the effectiveness of a proxy (adjusting lending) for the adjustment programs.