Trade liberalisation, the real exchange rate and sectoral employment : a case study of South Africa
- Authors: Sibanda, Kin
- Date: 2016
- Subjects: Foreign exchange rates Employment (Economic theory) Free trade -- South Africa
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10353/12777 , vital:39360
- Description: This study examined the relationship between trade liberalisation, the real exchange rate and sectoral employment in South Africa for the period 1994 to 2014. Firstly, using quarterly time series data, the Autoregressive Distributed Lag (ARDL) technique was employed to formally check if South African real exchange rates are responsive to trade liberalisation. This was done to see if trade liberalisation impacts real exchange rates in South Africa, to the extent that they cannot be controlled concurrently in the subsequent models. Based on the ARDL results, trade liberalisation does not have a significant effect on the exchange rate. However, when the real exchange rate is an independent variable of trade liberalisation, the results show that real exchange rates affect trade, specifically the export propensity index. The next step was to assess the impact of trade liberalisation and real exchange rate on sectoral employment using quarterly panel data for South Africa from 1994 to 2014 controlling for both sector-specific and macro-economic variables. The study employed diverse panel data analysis techniques to separate the sectoral effects, starting with broad sectors followed by the disaggregated sectors, to identify the sectors most affected by real exchange rates and trade liberalisation. The Generalised method of Moments (GMM) results reveal that a unit increase in exchange rate (implying appreciation), causes employment to go down by about 9 percent in South Africa. The same relationship is depicted from the Pooled Mean Group (PMG) estimations in both the short run and long run. Random coefficients (betas) show that the real exchange rate negatively affects the primary and secondary sector with a positive but insignificant effect on the tertiary sector. The sub-sectors negatively hit hard by real exchange rates are communication, mining and transport. The results also show that trade liberalisation is linked to both job destruction and job creation. The static models reveal that trade openness has a statistically positive and significant impact on employment in the short run while the PMG estimator results show that the effect is negative and only significant in the short run. The dynamic models (GMM and PMG) showed trade liberalisation (as proxied by trade openness and import propensity) has a statistical and significantly positive short run impact on employment. This implies that selective trade liberalisation strategies are needed in order for South Africa to maximise the gains from trade.
- Full Text:
- Date Issued: 2016
- Authors: Sibanda, Kin
- Date: 2016
- Subjects: Foreign exchange rates Employment (Economic theory) Free trade -- South Africa
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10353/12777 , vital:39360
- Description: This study examined the relationship between trade liberalisation, the real exchange rate and sectoral employment in South Africa for the period 1994 to 2014. Firstly, using quarterly time series data, the Autoregressive Distributed Lag (ARDL) technique was employed to formally check if South African real exchange rates are responsive to trade liberalisation. This was done to see if trade liberalisation impacts real exchange rates in South Africa, to the extent that they cannot be controlled concurrently in the subsequent models. Based on the ARDL results, trade liberalisation does not have a significant effect on the exchange rate. However, when the real exchange rate is an independent variable of trade liberalisation, the results show that real exchange rates affect trade, specifically the export propensity index. The next step was to assess the impact of trade liberalisation and real exchange rate on sectoral employment using quarterly panel data for South Africa from 1994 to 2014 controlling for both sector-specific and macro-economic variables. The study employed diverse panel data analysis techniques to separate the sectoral effects, starting with broad sectors followed by the disaggregated sectors, to identify the sectors most affected by real exchange rates and trade liberalisation. The Generalised method of Moments (GMM) results reveal that a unit increase in exchange rate (implying appreciation), causes employment to go down by about 9 percent in South Africa. The same relationship is depicted from the Pooled Mean Group (PMG) estimations in both the short run and long run. Random coefficients (betas) show that the real exchange rate negatively affects the primary and secondary sector with a positive but insignificant effect on the tertiary sector. The sub-sectors negatively hit hard by real exchange rates are communication, mining and transport. The results also show that trade liberalisation is linked to both job destruction and job creation. The static models reveal that trade openness has a statistically positive and significant impact on employment in the short run while the PMG estimator results show that the effect is negative and only significant in the short run. The dynamic models (GMM and PMG) showed trade liberalisation (as proxied by trade openness and import propensity) has a statistical and significantly positive short run impact on employment. This implies that selective trade liberalisation strategies are needed in order for South Africa to maximise the gains from trade.
- Full Text:
- Date Issued: 2016
An analysis of the impact of democratization on debt-led growth : the Nigerian experience, 1970-2000
- Authors: Dinneya, Godson Eze
- Date: 2013-05-22
- Subjects: Debts, External -- Nigeria Nigeria -- Politics and government -- 1960- Nigeria -- Economic policy Nigeria -- Economic conditions -- 1960-
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1074 , http://hdl.handle.net/10962/d1007807
- Description: The debt-for democracy hypothesis is that undemocratic governments were largely responsible for not only the accumulation but also poor management of externally sourced capital resources. External borrowing had therefore failed to lead to growth of the economies of debtor countries under undemocratic political leadership. Despite this explanation of the debt problem conventional empirical analyses of the debt-growth relationship did not include political institutional variables. This study investigates the relationship between democratization and debt-led growth, using Nigeria, a typical debtor country whose politics was dominated by 'undemocratic ' governance, as a case study. Two broad research questions are investigated namely, whether available data support a negative or positive contribution of debt to the growth of the Nigeria economy during the period 1970-2000; and ifso was there any link between the levels of democratization in Nigeria and debt-led growth. Using a census of major political events in Nigeria around four dimensions of democratization, four primary indices of democratization and one composite index were constructed for the period. Using the Taylor (1983) marginal conditions to gauge the contribution of external debt to the growth of the Nigerian economy, the study found that external debt is capable of playing a double edged sword on the performance of the economy. Positive contributions coincided with the periods when Nigeria's oil dominated foreign exchange revenues were robust, and/ or when debt management strategies were better articulated and vice versa. The analyses of the link between democratization and debt-led growth using both correlation and regression techniques, yielded different results in two definitional contexts of debt-led growth. When defined purely in terms of the Taylor marginal conditions for a positive contribution of debt to the economy of a borrowing nation, the results support the pessimist view that democratization impeded growth. On the contrary, when debt-led growth was defined in a broader sense to incorporate variables such as domestic savings and investment, foreign direct investments, public and private consumption and debt burden, there was strong evidence that debt-led growth performed beller at higher levels of democratization than other wise. The result using the narrow definition was found to be a direct consequence of the overriding influence of export performance in the Taylor conditions. With Nigeria's exports almost entirely dominated by extractive industry the result derived using the narrow definition confirmed the theoretical links between natural resource endowment and regime type on the one hand, and external capital and the nature of the host country 's industry on the other. In the first resource dependence allowed the political leadership to be more detached and less accountable to the electorate since they did not need to levy taxes. Secondly foreign investors concerned with security of their sunk investments in the extractive oil induslly in particular favoured continuity of powerfol regimes with less democratic content. In both findings one thing was common: democratization was associated more with those factors whose decreases affect growth positively than with those whose increases improve growth. The conclusion from this is that the impact of democratization is stronger with negative than with positive growth factors. In other words, while democratization may be supportive of growth its greater impact appears to be in limiting the factors that themselves limit growth. To benefit from the favourable impact of democratisation on debt-led growth therefore the study suggests that improvements in the democratisation process in Nigeria is needed It identifies political education as central to this improvement. A model is developed to show how improvements in the political institutional framework may trickle down, through an enabling environment that is capable of engendering growth-enhancing domestic and international responses to lead in the direction of debt-led growth.
- Full Text:
An analysis of the impact of democratization on debt-led growth : the Nigerian experience, 1970-2000
- Authors: Dinneya, Godson Eze
- Date: 2013-05-22
- Subjects: Debts, External -- Nigeria Nigeria -- Politics and government -- 1960- Nigeria -- Economic policy Nigeria -- Economic conditions -- 1960-
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1074 , http://hdl.handle.net/10962/d1007807
- Description: The debt-for democracy hypothesis is that undemocratic governments were largely responsible for not only the accumulation but also poor management of externally sourced capital resources. External borrowing had therefore failed to lead to growth of the economies of debtor countries under undemocratic political leadership. Despite this explanation of the debt problem conventional empirical analyses of the debt-growth relationship did not include political institutional variables. This study investigates the relationship between democratization and debt-led growth, using Nigeria, a typical debtor country whose politics was dominated by 'undemocratic ' governance, as a case study. Two broad research questions are investigated namely, whether available data support a negative or positive contribution of debt to the growth of the Nigeria economy during the period 1970-2000; and ifso was there any link between the levels of democratization in Nigeria and debt-led growth. Using a census of major political events in Nigeria around four dimensions of democratization, four primary indices of democratization and one composite index were constructed for the period. Using the Taylor (1983) marginal conditions to gauge the contribution of external debt to the growth of the Nigerian economy, the study found that external debt is capable of playing a double edged sword on the performance of the economy. Positive contributions coincided with the periods when Nigeria's oil dominated foreign exchange revenues were robust, and/ or when debt management strategies were better articulated and vice versa. The analyses of the link between democratization and debt-led growth using both correlation and regression techniques, yielded different results in two definitional contexts of debt-led growth. When defined purely in terms of the Taylor marginal conditions for a positive contribution of debt to the economy of a borrowing nation, the results support the pessimist view that democratization impeded growth. On the contrary, when debt-led growth was defined in a broader sense to incorporate variables such as domestic savings and investment, foreign direct investments, public and private consumption and debt burden, there was strong evidence that debt-led growth performed beller at higher levels of democratization than other wise. The result using the narrow definition was found to be a direct consequence of the overriding influence of export performance in the Taylor conditions. With Nigeria's exports almost entirely dominated by extractive industry the result derived using the narrow definition confirmed the theoretical links between natural resource endowment and regime type on the one hand, and external capital and the nature of the host country 's industry on the other. In the first resource dependence allowed the political leadership to be more detached and less accountable to the electorate since they did not need to levy taxes. Secondly foreign investors concerned with security of their sunk investments in the extractive oil induslly in particular favoured continuity of powerfol regimes with less democratic content. In both findings one thing was common: democratization was associated more with those factors whose decreases affect growth positively than with those whose increases improve growth. The conclusion from this is that the impact of democratization is stronger with negative than with positive growth factors. In other words, while democratization may be supportive of growth its greater impact appears to be in limiting the factors that themselves limit growth. To benefit from the favourable impact of democratisation on debt-led growth therefore the study suggests that improvements in the democratisation process in Nigeria is needed It identifies political education as central to this improvement. A model is developed to show how improvements in the political institutional framework may trickle down, through an enabling environment that is capable of engendering growth-enhancing domestic and international responses to lead in the direction of debt-led growth.
- Full Text:
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