 Risk management in sub-Saharan AfricaStijn Claessens () and Ying Qian No 593, Policy Research Working Paper Series from The World Bank Abstract: This paper investigates the vulnerability of countries in sub - Saharan Africa to uncertainty about commodity prices, exchange rates, and interest rates. It discusses some of the instruments these countries can use to manage financial risk and conclude that instruments linked to commodity prices would significantly reduce their risk. To account for possible interactions between external risks, the paper estimates the optimal portfolio of financial instruments for sub - Saharan Africa. It shows that the risk-minimizing portfolio for sub - Saharan Africa comprises only about 30 percent of general-obligation loans and about 70 percent of loans for which repayment obligations are indexed to the price of sub - Saharan Africa's most important exports: cocoa, coffee, cotton, copper, and oil. This portfolio reduces by about 90 percent the uncertainty of sub - Saharan Africa's resources available for imports. The risk-reduction benefit of the optimal portfolio is fairly stable for specific commodities included and for the specific period for which it is estimated. Keywords: Insurance&Risk Mitigation; Financial Intermediation; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:593 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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