Inflation threshold and nonlinearity: implications for inflation targeting in South Africa
- Authors: Morar, Derwina
- Date: 2011
- Subjects: Inflation targeting -- South Africa Interest rates -- Effect of inflation on -- South Africa Monetary policy -- South Africa Economic development -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:984 , http://hdl.handle.net/10962/d1002718
- Description: Following many other central banks around the world, the South African Reserve Bank has adopted inflation targeting as its monetary policy framework. The aim of this is to achieve low levels of inflation in order to attain price stability thereby promoting growth. In South Africa, the chosen band to target is 3%–6%. This has been criticised by many trade unions who are calling for the abandonment of inflation targeting. Despite targeting 3%–6%, it is not known whether this is the optimal inflation range for South Africa. Therefore, the aim of this study is to determine the inflation threshold level for South Africa using quarterly data for the period 1983 to 2010. The first section determines whether or not there is a long-run relationship between inflation and growth using the Johansen cointegration method. Exogeneity tests determine the causality between these variables. Vector error correction models are estimated if cointegration is found. The second part determines the threshold level of inflation using the method of conditional least squares. The inflation level that maximises the R-squared value and minimises the residual sum of squares gives an indication of the threshold level. The third part of the study determines whether or not inflation volatility has a significant impact on growth. The first part established that there is long-run comovement between inflation and growth.The causality is bidirectional with both variables being endogenous.Findings regarding the threshold level show that the current inflation targeting band of 3%–6% may be extended up to 9.5%. In addition, the range of inflation from 5.5% to 6.5% promotes economic growth in South Africa. Finally, the evidence suggests that inflation volatility does not have a significant impact on economic growth and the focus of policy should be directed towards the level of inflation as has been the case.
- Full Text:
- Authors: Morar, Derwina
- Date: 2011
- Subjects: Inflation targeting -- South Africa Interest rates -- Effect of inflation on -- South Africa Monetary policy -- South Africa Economic development -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:984 , http://hdl.handle.net/10962/d1002718
- Description: Following many other central banks around the world, the South African Reserve Bank has adopted inflation targeting as its monetary policy framework. The aim of this is to achieve low levels of inflation in order to attain price stability thereby promoting growth. In South Africa, the chosen band to target is 3%–6%. This has been criticised by many trade unions who are calling for the abandonment of inflation targeting. Despite targeting 3%–6%, it is not known whether this is the optimal inflation range for South Africa. Therefore, the aim of this study is to determine the inflation threshold level for South Africa using quarterly data for the period 1983 to 2010. The first section determines whether or not there is a long-run relationship between inflation and growth using the Johansen cointegration method. Exogeneity tests determine the causality between these variables. Vector error correction models are estimated if cointegration is found. The second part determines the threshold level of inflation using the method of conditional least squares. The inflation level that maximises the R-squared value and minimises the residual sum of squares gives an indication of the threshold level. The third part of the study determines whether or not inflation volatility has a significant impact on growth. The first part established that there is long-run comovement between inflation and growth.The causality is bidirectional with both variables being endogenous.Findings regarding the threshold level show that the current inflation targeting band of 3%–6% may be extended up to 9.5%. In addition, the range of inflation from 5.5% to 6.5% promotes economic growth in South Africa. Finally, the evidence suggests that inflation volatility does not have a significant impact on economic growth and the focus of policy should be directed towards the level of inflation as has been the case.
- Full Text:
Monetary policy transmission in South Africa: a comparative analysis of credit and exchange rate channels
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
- Full Text:
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
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South African money market volatility, asymmetry and retail interest pass-through
- Authors: Fadiran, Gideon Oluwatobi
- Date: 2011
- Subjects: Money market -- South Africa Interest rates -- South Africa Monetary policy -- South Africa Econometric models Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:993 , http://hdl.handle.net/10962/d1002728
- Description: The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.
- Full Text:
- Authors: Fadiran, Gideon Oluwatobi
- Date: 2011
- Subjects: Money market -- South Africa Interest rates -- South Africa Monetary policy -- South Africa Econometric models Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:993 , http://hdl.handle.net/10962/d1002728
- Description: The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.
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The contribution made by Mr Justice EF Watermeyer to South African tax jurisprudence
- Authors: Thackwell, Robert Colin
- Date: 2011
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: vital:881 , http://hdl.handle.net/10962/d1001635
- Description: The objective of this thesis is to highlight the colossal contributions made by the late Justice Watermeyer to South African tax jurisprudence. His contributions are viewed from a practical application point of view as well as from a statutory interpretative perspective. The style and technique with which he delivered his judgments are also considered to be a contribution in their own right. The core of this thesis is the analysis of seven of Justice Watermeyer‟s most influential judgments. The development and application of the principle or principles developed in each of these seven judgments is then traced chronologically through case law up until recent judgments. It is most notable that each and every phrase contained in section 11(a) of the Income Tax Act has been interpreted by Justice Watermeyer. These interpretations are still viewed as correct statements of the applicable law and will continue to be referred to on a regular basis given the fact that section 11(a) is one of the most widely contested provisions in the Income Tax Act. Several references to his approach to statutory interpretation are made through the course of the case analyses. Whilst significant evidence of a purposive oriented approach to interpretation appears in some judgments, such evidence is lacking in others. An absolute or conclusive submission in terms of his approach to statutory interpretation is not sufficiently supported. His style of judgment is also referred to and commented on, with particular focus placed on his use of illustrative examples. The contribution to South African tax law by Justice Watermeyer is found to be nothing short of enormous. He was and continues to be influential with respect to section 11(a),the definition of gross income in section 1, common law principles of tax avoidance as well as the interpretation of statutory laws of tax avoidance. It is anticipated that some of his interpretations with respect to statutory rules of tax avoidance will be referred to when the relatively new anti-avoidance provisions become the subject of litigation.
- Full Text:
- Authors: Thackwell, Robert Colin
- Date: 2011
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: vital:881 , http://hdl.handle.net/10962/d1001635
- Description: The objective of this thesis is to highlight the colossal contributions made by the late Justice Watermeyer to South African tax jurisprudence. His contributions are viewed from a practical application point of view as well as from a statutory interpretative perspective. The style and technique with which he delivered his judgments are also considered to be a contribution in their own right. The core of this thesis is the analysis of seven of Justice Watermeyer‟s most influential judgments. The development and application of the principle or principles developed in each of these seven judgments is then traced chronologically through case law up until recent judgments. It is most notable that each and every phrase contained in section 11(a) of the Income Tax Act has been interpreted by Justice Watermeyer. These interpretations are still viewed as correct statements of the applicable law and will continue to be referred to on a regular basis given the fact that section 11(a) is one of the most widely contested provisions in the Income Tax Act. Several references to his approach to statutory interpretation are made through the course of the case analyses. Whilst significant evidence of a purposive oriented approach to interpretation appears in some judgments, such evidence is lacking in others. An absolute or conclusive submission in terms of his approach to statutory interpretation is not sufficiently supported. His style of judgment is also referred to and commented on, with particular focus placed on his use of illustrative examples. The contribution to South African tax law by Justice Watermeyer is found to be nothing short of enormous. He was and continues to be influential with respect to section 11(a),the definition of gross income in section 1, common law principles of tax avoidance as well as the interpretation of statutory laws of tax avoidance. It is anticipated that some of his interpretations with respect to statutory rules of tax avoidance will be referred to when the relatively new anti-avoidance provisions become the subject of litigation.
- Full Text:
The impact of the new dividend withholding tax on regulated investment intermediaries
- Authors: Schafer, Carolyn
- Date: 2011
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:880 , http://hdl.handle.net/10962/d1001634
- Description: The introduction of the proposed new Dividends Tax will have a significant impact on financial institutions such as Collective Investment Schemes, Linked Investment Service Providers and Long-term Insurers. The reason for this is that South African listed companies declaring local dividends will not necessarily have all the details of and know the identity of their shareholders. These financial institutions may be regarded as regulated intermediaries in terms of the new Dividends Tax legislation and therefore may have the responsibility of withholding the Dividends Tax from dividends received on behalf of their clients, who may in most cases be the beneficial owners of the underlying equity shares. The motivating factor for the research is the fact that there does not appear to be any guidance on the impact of the new Dividends Tax on financial institutions, since the Dividends Tax is new legislation. The research problem addressed in this thesis is how the systems and processes of a financial institution will be affected by the implementation of the new Dividends Tax. The research took the form of a case study designed to investigate the impact of the Dividends Tax on the financial institution at which the researcher is employed. The data required for the research was collected by means of a study of the relevant legislation enacted in connection with the topic, journal articles in financial/tax journals, as well as articles published in the media. The systems and processes presently in place, as well as the changes to these systems that will be needed to accommodate the new dividend tax were ascertained by means of in-depth interviews with relevant staff at the financial institution. In addition, the researcher also applied her personal knowledge of the business of the financial institution at which she works to the problem. As a result of the research it was determined that a Collective Investment Scheme, Linked Investment Service Provider and Long-Term Insurer will all be regarded as regulated intermediaries for the purposes of the new dividend withholding tax. This means that these financial institutions will be required to withhold Dividends Tax from dividends paid to their clients and pay this Dividends Tax so withheld to SARS. Furthermore, the findings of the research confirmed that the new Dividends Tax will have a significant impact on the client services department in areas such as notifying clients, training of client service staff, handling of declaration of exemption forms received from clients, amending client statements and tax certificates (to cater for the new Dividends Tax). In addition to this, it was ascertained that significant systems development will be required by these financial institutions in order to comply with the new Dividends Tax legislation. This would include the development of data input fields to enable users to capture the relevant information required and development of the system to enable it to flag local dividends received to which the Dividends Tax applies. The system would also need to cater for Secondary Tax on Companies credits as well as foreign tax rebates. The system should also be able to calculate the amount of Dividends Tax to withhold per dividend received by a client, as well as be able to handle the payment of the Dividends Tax to SARS and the refund to clients of Dividends Tax over deducted. It is essential that systems are able to flag the correct date of payment of the dividend so that the Dividends Tax can be paid over timeously to SARS in order to avoid interest and penalties being levied. To summarise, the new Dividends Tax has a significant impact on these financial institutions in areas such as client services, administration and system development.
- Full Text:
- Authors: Schafer, Carolyn
- Date: 2011
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:880 , http://hdl.handle.net/10962/d1001634
- Description: The introduction of the proposed new Dividends Tax will have a significant impact on financial institutions such as Collective Investment Schemes, Linked Investment Service Providers and Long-term Insurers. The reason for this is that South African listed companies declaring local dividends will not necessarily have all the details of and know the identity of their shareholders. These financial institutions may be regarded as regulated intermediaries in terms of the new Dividends Tax legislation and therefore may have the responsibility of withholding the Dividends Tax from dividends received on behalf of their clients, who may in most cases be the beneficial owners of the underlying equity shares. The motivating factor for the research is the fact that there does not appear to be any guidance on the impact of the new Dividends Tax on financial institutions, since the Dividends Tax is new legislation. The research problem addressed in this thesis is how the systems and processes of a financial institution will be affected by the implementation of the new Dividends Tax. The research took the form of a case study designed to investigate the impact of the Dividends Tax on the financial institution at which the researcher is employed. The data required for the research was collected by means of a study of the relevant legislation enacted in connection with the topic, journal articles in financial/tax journals, as well as articles published in the media. The systems and processes presently in place, as well as the changes to these systems that will be needed to accommodate the new dividend tax were ascertained by means of in-depth interviews with relevant staff at the financial institution. In addition, the researcher also applied her personal knowledge of the business of the financial institution at which she works to the problem. As a result of the research it was determined that a Collective Investment Scheme, Linked Investment Service Provider and Long-Term Insurer will all be regarded as regulated intermediaries for the purposes of the new dividend withholding tax. This means that these financial institutions will be required to withhold Dividends Tax from dividends paid to their clients and pay this Dividends Tax so withheld to SARS. Furthermore, the findings of the research confirmed that the new Dividends Tax will have a significant impact on the client services department in areas such as notifying clients, training of client service staff, handling of declaration of exemption forms received from clients, amending client statements and tax certificates (to cater for the new Dividends Tax). In addition to this, it was ascertained that significant systems development will be required by these financial institutions in order to comply with the new Dividends Tax legislation. This would include the development of data input fields to enable users to capture the relevant information required and development of the system to enable it to flag local dividends received to which the Dividends Tax applies. The system would also need to cater for Secondary Tax on Companies credits as well as foreign tax rebates. The system should also be able to calculate the amount of Dividends Tax to withhold per dividend received by a client, as well as be able to handle the payment of the Dividends Tax to SARS and the refund to clients of Dividends Tax over deducted. It is essential that systems are able to flag the correct date of payment of the dividend so that the Dividends Tax can be paid over timeously to SARS in order to avoid interest and penalties being levied. To summarise, the new Dividends Tax has a significant impact on these financial institutions in areas such as client services, administration and system development.
- Full Text:
The relationship between financial development and manufacturing sector growth: evidence from Southern African Customs Union countries
- Authors: Moshabesha, Mosili
- Date: 2011
- Subjects: Economic development -- Case studies -- Africa, Southern Entrepreneurship -- Case studies -- Africa, Southern Southern African Customs Union
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:990 , http://hdl.handle.net/10962/d1002725
- Description: Extensive research has been done on the relationship between financial development (FD) and growth (with the main focus on economic growth). Theoretical models and most of the conclusions reached stipulate that the development of a financial system is one of the essential ingredients for economic growth. A developed financial system is able to provide financial services efficiently to the real sector. This study examines the relationship between FD and manufacturing sector growth of the SACU countries. The study first reviews the theoretical and empirical literature of FD and growth (economic and manufacturing sector). This gives a full understanding of the topic before attempting to empirically study it. It also helps in the selection process of the model and variables to be employed in the study. A balanced panel for four SACU countries, namely Botswana, Lesotho, RSA and Swaziland, for the period 1976 to 2008 was estimated using Zellner‟s Seemingly Unrelated Regression Estimation (SURE) method. Namibia was omitted because of limited data. The SURE model was selected because it performs better than ordinary least squares (OLS) estimation of individual equations in cases where the countries studied can be affected by similar external shocks because they are in the same economic region and also have country specific structural differences which could affect their economic growth. Two measures of FD were used: credit to the private sector provided by commercial banks (FIC) and the ratio of liquid liabilities of commercial banks to GDP (LL). Manufacturing sector growth was measured by manufacturing value added to GDP. The results of the relationship between manufacturing growth and FD were very weak across the countries. The model that used FIC performed better, there was a negative significant relationship found in RSA and Swaziland, while with the model that used LL, all the countries gave an insignificant relationship. The results for Swaziland were very consistent with the past findings of the relationship between FD and economic growth in the country (for example Aziakpono (2005a)). This may be because of the high share of the manufacturing sector in GDP. Theory suggests that a well-developed financial system will have a positive impact on growth, but this was not the case in RSA and Botswana, where in some cases FD had a negative impact on the growth of the sector. The analysis of the countries‟ manufacturing sector development shows that the sector plays an important role in the economies of the SACU countries, especially in terms of employment and exports. The coefficients of trade openness are generally positive, though not significant in some cases. The other control variables gave mixed results across the counties and across the models. Based on the findings, the countries have to develop strategies that will improve entrepreneurial skills. Also the financial development in the small SACU countries is essential in order for all the sectors in the economy to benefit from the financial sector and in turn increase economic growth.
- Full Text:
- Authors: Moshabesha, Mosili
- Date: 2011
- Subjects: Economic development -- Case studies -- Africa, Southern Entrepreneurship -- Case studies -- Africa, Southern Southern African Customs Union
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:990 , http://hdl.handle.net/10962/d1002725
- Description: Extensive research has been done on the relationship between financial development (FD) and growth (with the main focus on economic growth). Theoretical models and most of the conclusions reached stipulate that the development of a financial system is one of the essential ingredients for economic growth. A developed financial system is able to provide financial services efficiently to the real sector. This study examines the relationship between FD and manufacturing sector growth of the SACU countries. The study first reviews the theoretical and empirical literature of FD and growth (economic and manufacturing sector). This gives a full understanding of the topic before attempting to empirically study it. It also helps in the selection process of the model and variables to be employed in the study. A balanced panel for four SACU countries, namely Botswana, Lesotho, RSA and Swaziland, for the period 1976 to 2008 was estimated using Zellner‟s Seemingly Unrelated Regression Estimation (SURE) method. Namibia was omitted because of limited data. The SURE model was selected because it performs better than ordinary least squares (OLS) estimation of individual equations in cases where the countries studied can be affected by similar external shocks because they are in the same economic region and also have country specific structural differences which could affect their economic growth. Two measures of FD were used: credit to the private sector provided by commercial banks (FIC) and the ratio of liquid liabilities of commercial banks to GDP (LL). Manufacturing sector growth was measured by manufacturing value added to GDP. The results of the relationship between manufacturing growth and FD were very weak across the countries. The model that used FIC performed better, there was a negative significant relationship found in RSA and Swaziland, while with the model that used LL, all the countries gave an insignificant relationship. The results for Swaziland were very consistent with the past findings of the relationship between FD and economic growth in the country (for example Aziakpono (2005a)). This may be because of the high share of the manufacturing sector in GDP. Theory suggests that a well-developed financial system will have a positive impact on growth, but this was not the case in RSA and Botswana, where in some cases FD had a negative impact on the growth of the sector. The analysis of the countries‟ manufacturing sector development shows that the sector plays an important role in the economies of the SACU countries, especially in terms of employment and exports. The coefficients of trade openness are generally positive, though not significant in some cases. The other control variables gave mixed results across the counties and across the models. Based on the findings, the countries have to develop strategies that will improve entrepreneurial skills. Also the financial development in the small SACU countries is essential in order for all the sectors in the economy to benefit from the financial sector and in turn increase economic growth.
- Full Text:
The short-term effect on shareholder wealth of banking mergers and acquisitions during periods of real economic expansion and contraction
- Authors: Kerr, Gordon Roy
- Date: 2011
- Subjects: Bank mergers , Consolidation and merger of corporations , Business cycles , Corporations -- Investor relations , Stockholder wealth , Rate of return
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1108 , http://hdl.handle.net/10962/d1013442
- Description: Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.
- Full Text:
- Authors: Kerr, Gordon Roy
- Date: 2011
- Subjects: Bank mergers , Consolidation and merger of corporations , Business cycles , Corporations -- Investor relations , Stockholder wealth , Rate of return
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1108 , http://hdl.handle.net/10962/d1013442
- Description: Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.
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The strategic management of intellectual capital : a case study in the banking and financial services sector in Zambia
- Authors: Banda, Japhet Mathias
- Date: 2011
- Subjects: Intellectual capital -- Management , Intellectual capital -- Zambia , Banks and banking -- Zambia , Financial services industry -- Management -- Zambia
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1178 , http://hdl.handle.net/10962/d1002795 , Intellectual capital -- Management , Intellectual capital -- Zambia , Banks and banking -- Zambia , Financial services industry -- Management -- Zambia
- Description: Fundamental changes in the global economy are changing the basis of organisational competitive advantage. The challenge in attaining a competitive advantage is characterised by factors such as increased competition, market volatility, geographically dispersed operations, customer awareness, raising workforce diversity and stringent regulatory regimes. These factors have driven, and in turn have been driven by, an increasing complexity of products, services and the processes that create value, resulting in changes in the structural and functional dimensions of the organisation. Business executives and academics recognise the shift in value creating assets from the traditional land, labour and capital to intangible assets such as knowledge and information becoming the most important resources an organisation can muster.The combination and integration of intangible assets such as human resources, structural and relational resources has been grouped under the umbrella of intellectual capital. This study comprises of a single descriptive case study analysis to ascertain how intellectual capital is managed strategically to gain a competitive advantage in an organisation in the banking and financial services sector in Zambia. Based on document review and semi-structured interviews, this thesis investigated the extent to which an organisation in the banking and financial services sector in Zambia leveraged intellectual capital to gain competitive advantage. In this study it was found that there is a low level appreciation of the intellectual capital phenomenon as a strategic management tool in the participating organisation. However, the organisation has adopted aspects of intellectual capital and has implemented them successfully accounting for the organisation‘s competitive edge in the market.
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- Authors: Banda, Japhet Mathias
- Date: 2011
- Subjects: Intellectual capital -- Management , Intellectual capital -- Zambia , Banks and banking -- Zambia , Financial services industry -- Management -- Zambia
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1178 , http://hdl.handle.net/10962/d1002795 , Intellectual capital -- Management , Intellectual capital -- Zambia , Banks and banking -- Zambia , Financial services industry -- Management -- Zambia
- Description: Fundamental changes in the global economy are changing the basis of organisational competitive advantage. The challenge in attaining a competitive advantage is characterised by factors such as increased competition, market volatility, geographically dispersed operations, customer awareness, raising workforce diversity and stringent regulatory regimes. These factors have driven, and in turn have been driven by, an increasing complexity of products, services and the processes that create value, resulting in changes in the structural and functional dimensions of the organisation. Business executives and academics recognise the shift in value creating assets from the traditional land, labour and capital to intangible assets such as knowledge and information becoming the most important resources an organisation can muster.The combination and integration of intangible assets such as human resources, structural and relational resources has been grouped under the umbrella of intellectual capital. This study comprises of a single descriptive case study analysis to ascertain how intellectual capital is managed strategically to gain a competitive advantage in an organisation in the banking and financial services sector in Zambia. Based on document review and semi-structured interviews, this thesis investigated the extent to which an organisation in the banking and financial services sector in Zambia leveraged intellectual capital to gain competitive advantage. In this study it was found that there is a low level appreciation of the intellectual capital phenomenon as a strategic management tool in the participating organisation. However, the organisation has adopted aspects of intellectual capital and has implemented them successfully accounting for the organisation‘s competitive edge in the market.
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Volatility transmission across South African financial markets: does the bull – bear distinction matter?
- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
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- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
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