An analysis of the determinants and recent decline of private savings in South Africa
- Authors: Linde, Kathryn Leigh
- Date: 2012
- Subjects: Saving and investment -- Research -- South Africa Finance, Personal -- Research -- South Africa Corporations -- Finance -- Research -- South Africa Economic development -- Research -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1007 , http://hdl.handle.net/10962/d1002742
- Description: Low domestic saving rates make South Africa highly dependent on foreign capital inflows to fund higher investment levels. These inflows are highly volatile and may prove to be unsustainable in the long-run. This study analyses the determinants of private saving in South Africa, with specific reference to the decline in private saving rates that occurred at a time of higher economic growth prior to the 2008 global financial crisis. The Johansen cointegration method is used to estimate separate vector error correction models (VECM) in order to assess the effect of specific variables on both corporate and household saving. The results obtained that are common to both corporate and household savmg show that the govemment budget balance negatively impacts private saving rates though the offset is less than one. The real prime overdraft rate positively impacts private saving, although the result is small . The impact of real Gross Domestic Product (GDP) is positive. In recent years, however, private saving rates fell alongside higher economic growth, which may reflect a structural change in corporate saving behaviour. The results distinct to the corporate saving model show that commodity prices have a negative impact on corporate saving. This does not conform to a priori expectations, but is supported by the behaviour of these two variables in recent years. Foreign savings were found to impact negatively on corporate saving. This result is important, since the dependence of the South African economy on foreign capital inflows to fund higher investment levels is reflected by high current account deficits during recent periods of economic growth. Evidence of financial liberalization negatively impacting on private saving in South Africa due to the removal of borrowing constraints was found. A negative relationship was found between corporate saving and investment demonstrating that corporations have reduced levels of retained eamings for funding investment expenditures. The results distinct to the household saving model provide evidence of a negative wealth effect in South Africa, with rising housing wealth found to increase consumption. Evidence of households "piercing the corporate veil" in South Africa was found. Therefore, households view corporate saving behaviour as essentially being conducted on their behalf. This finding and the finding that the offset between the budget deficit and private saving is less than one suggest that counter-cyclical fiscal policy will be an important policy response for achieving higher domestic saving rates in South Africa.
- Full Text:
- Date Issued: 2012
- Authors: Linde, Kathryn Leigh
- Date: 2012
- Subjects: Saving and investment -- Research -- South Africa Finance, Personal -- Research -- South Africa Corporations -- Finance -- Research -- South Africa Economic development -- Research -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1007 , http://hdl.handle.net/10962/d1002742
- Description: Low domestic saving rates make South Africa highly dependent on foreign capital inflows to fund higher investment levels. These inflows are highly volatile and may prove to be unsustainable in the long-run. This study analyses the determinants of private saving in South Africa, with specific reference to the decline in private saving rates that occurred at a time of higher economic growth prior to the 2008 global financial crisis. The Johansen cointegration method is used to estimate separate vector error correction models (VECM) in order to assess the effect of specific variables on both corporate and household saving. The results obtained that are common to both corporate and household savmg show that the govemment budget balance negatively impacts private saving rates though the offset is less than one. The real prime overdraft rate positively impacts private saving, although the result is small . The impact of real Gross Domestic Product (GDP) is positive. In recent years, however, private saving rates fell alongside higher economic growth, which may reflect a structural change in corporate saving behaviour. The results distinct to the corporate saving model show that commodity prices have a negative impact on corporate saving. This does not conform to a priori expectations, but is supported by the behaviour of these two variables in recent years. Foreign savings were found to impact negatively on corporate saving. This result is important, since the dependence of the South African economy on foreign capital inflows to fund higher investment levels is reflected by high current account deficits during recent periods of economic growth. Evidence of financial liberalization negatively impacting on private saving in South Africa due to the removal of borrowing constraints was found. A negative relationship was found between corporate saving and investment demonstrating that corporations have reduced levels of retained eamings for funding investment expenditures. The results distinct to the household saving model provide evidence of a negative wealth effect in South Africa, with rising housing wealth found to increase consumption. Evidence of households "piercing the corporate veil" in South Africa was found. Therefore, households view corporate saving behaviour as essentially being conducted on their behalf. This finding and the finding that the offset between the budget deficit and private saving is less than one suggest that counter-cyclical fiscal policy will be an important policy response for achieving higher domestic saving rates in South Africa.
- Full Text:
- Date Issued: 2012
Performance of defensive shares on the JSE during financial crisis: evidence from analysis of returns and volatility
- Authors: Arguile, Wayne Peter
- Date: 2012
- Subjects: Industries -- South Africa -- Finance Industries -- South Africa -- Statistics Johannesburg Stock Exchange Rational expectations (Economic theory)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1001 , http://hdl.handle.net/10962/d1002736
- Description: This study analyses whether historically defensive sectors on the JSE have – with respect to the market – proven to be defensive during the recent global financial crisis. By withstanding the shocks of market volatility, defensive industries (such as pharmaceuticals and consumer staples) are renowned for their consistent performance throughout the business cycle. Using daily data for the period 2000–2009, the study compares the descriptive statistics of sector returns before and during the crisis. The volatility of each sector relative to the market index is calculated using the CAPM beta and a simplified volatility ratio. The same comparison is extended to the conditional volatilities of each of the sectors, which is estimated using the GARCH model and two of its extensions: the EGARCH and GJR GARCH models. While no sector experienced a positive mean return during the financial crisis, Healthcare, Consumer Goods, Consumer Services and Industrials all proved less volatile than the market. Surprisingly, Telecommunications proved more volatile than the market and experienced leverage effects during the financial crisis. Since the timing of a recession is difficult to predict, defensive securities were found to be a useful investment tool for protection against adverse movements in the stock market.
- Full Text:
- Date Issued: 2012
- Authors: Arguile, Wayne Peter
- Date: 2012
- Subjects: Industries -- South Africa -- Finance Industries -- South Africa -- Statistics Johannesburg Stock Exchange Rational expectations (Economic theory)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1001 , http://hdl.handle.net/10962/d1002736
- Description: This study analyses whether historically defensive sectors on the JSE have – with respect to the market – proven to be defensive during the recent global financial crisis. By withstanding the shocks of market volatility, defensive industries (such as pharmaceuticals and consumer staples) are renowned for their consistent performance throughout the business cycle. Using daily data for the period 2000–2009, the study compares the descriptive statistics of sector returns before and during the crisis. The volatility of each sector relative to the market index is calculated using the CAPM beta and a simplified volatility ratio. The same comparison is extended to the conditional volatilities of each of the sectors, which is estimated using the GARCH model and two of its extensions: the EGARCH and GJR GARCH models. While no sector experienced a positive mean return during the financial crisis, Healthcare, Consumer Goods, Consumer Services and Industrials all proved less volatile than the market. Surprisingly, Telecommunications proved more volatile than the market and experienced leverage effects during the financial crisis. Since the timing of a recession is difficult to predict, defensive securities were found to be a useful investment tool for protection against adverse movements in the stock market.
- Full Text:
- Date Issued: 2012
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