The determinants of economic growth in BRICS Countries
- Authors: Nyirenda, Chimwemwe
- Date: 2019
- Subjects: Economic development -- BRIC countries , BRIC countries -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/42946 , vital:36713
- Description: One of the key goals of the formation of BRICS (Brazil, Russia, India, China and South Africa) was to promote stability in trade and investment which would boost growth as the five BRICS countries recovered from the 2009 global financial crisis. This however has not been the case for all BRICS countries where only certain members have experienced a substantial increase in growth while others have experienced declining growth rates. The objective of this study was to analyse the determinants of economic growth in BRICS countries in order to investigate the causes of growth rates varying amongst the BRICS economies. This paper considered various economic theories for proximate and fundamental determinants of growth which included: The Harrod-Domar model, The Neoclassical Growth Theory, The Endogenous Growth Model, The New Growth Theory, Institutions and Economic Growth, Democracy, The Quality of Governance and Growth, Finance and Growth, Trade and Economic Growth and lastly Financial Openness and Growth. The study was conducted for a period covering from 1995 to 2016 and made use of the Autoregressive Distributed Lag (ARDL) model for the single-country analysis and Pooled Mean Group (PMG) was used for the panel analysis. In the single-country analysis, the descriptive statistics indicated that individually all of the BRICS members on average experienced positive GDP growth, positive investment (capital formation) and trade openness between 1995 to 2016. The single-country analysis made use of the ARDL Bounds test to investigate cointegration in each country and a long-run relationship was established in all BRICS countries except for China. The augmented Solow model was extended to incorporate both proximate and fundamental determinants of growth. The estimated results for the ARDL model found that capital and trade openness were significant in determining GDP growth for all of the BRICS countries except for China. FDI was insignificant in determining growth in BRICS countries except for India and the remaining variables gave mixed results between the countries. The error correction term (ECT) was significant and negative in all of the BRICS countries (except for China) which indicated that there was convergence. In the panel analysis, a long-run relationship was established using the KAO Residual cointegration test. The panel correlations test for BRICS revealed that GDP growth had a positive correlation with all the variables under analysis except for inflation which was in line with the anticipated correlations. The PMG estimated results for BRICS found that the proximate determinants (capital and labour) were both significant in determining growth in the long-run where capital had a positive relationship and labour had a negative relationship with growth. Trade openness, inflation and FDI were significant in determining growth in the long-run, though government expenditure was insignificant in determining growth. The error correction term for BRICS illustrated that there was convergence and 92% of the disequilibrium in the short-run is corrected each year. The analysis revealed that BRICS economies should adopt more policies that encourage domestic investment and trade in order to boost growth. Policies such as relaxing local corporation taxes can encourage domestic investment which will aid local businesses in competing against foreign competition. Countries such as Brazil, India and South Africa can adopt more policies that encourage the development and growth of SMME’s. An area for future research would be to incorporate a location variable into the fundamental determinants of growth where the analysis could be conducted per region in each of the BRICS countries, which would give a broader view on which regions are determining growth in BRICS countries.
- Full Text:
- Date Issued: 2019
- Authors: Nyirenda, Chimwemwe
- Date: 2019
- Subjects: Economic development -- BRIC countries , BRIC countries -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/42946 , vital:36713
- Description: One of the key goals of the formation of BRICS (Brazil, Russia, India, China and South Africa) was to promote stability in trade and investment which would boost growth as the five BRICS countries recovered from the 2009 global financial crisis. This however has not been the case for all BRICS countries where only certain members have experienced a substantial increase in growth while others have experienced declining growth rates. The objective of this study was to analyse the determinants of economic growth in BRICS countries in order to investigate the causes of growth rates varying amongst the BRICS economies. This paper considered various economic theories for proximate and fundamental determinants of growth which included: The Harrod-Domar model, The Neoclassical Growth Theory, The Endogenous Growth Model, The New Growth Theory, Institutions and Economic Growth, Democracy, The Quality of Governance and Growth, Finance and Growth, Trade and Economic Growth and lastly Financial Openness and Growth. The study was conducted for a period covering from 1995 to 2016 and made use of the Autoregressive Distributed Lag (ARDL) model for the single-country analysis and Pooled Mean Group (PMG) was used for the panel analysis. In the single-country analysis, the descriptive statistics indicated that individually all of the BRICS members on average experienced positive GDP growth, positive investment (capital formation) and trade openness between 1995 to 2016. The single-country analysis made use of the ARDL Bounds test to investigate cointegration in each country and a long-run relationship was established in all BRICS countries except for China. The augmented Solow model was extended to incorporate both proximate and fundamental determinants of growth. The estimated results for the ARDL model found that capital and trade openness were significant in determining GDP growth for all of the BRICS countries except for China. FDI was insignificant in determining growth in BRICS countries except for India and the remaining variables gave mixed results between the countries. The error correction term (ECT) was significant and negative in all of the BRICS countries (except for China) which indicated that there was convergence. In the panel analysis, a long-run relationship was established using the KAO Residual cointegration test. The panel correlations test for BRICS revealed that GDP growth had a positive correlation with all the variables under analysis except for inflation which was in line with the anticipated correlations. The PMG estimated results for BRICS found that the proximate determinants (capital and labour) were both significant in determining growth in the long-run where capital had a positive relationship and labour had a negative relationship with growth. Trade openness, inflation and FDI were significant in determining growth in the long-run, though government expenditure was insignificant in determining growth. The error correction term for BRICS illustrated that there was convergence and 92% of the disequilibrium in the short-run is corrected each year. The analysis revealed that BRICS economies should adopt more policies that encourage domestic investment and trade in order to boost growth. Policies such as relaxing local corporation taxes can encourage domestic investment which will aid local businesses in competing against foreign competition. Countries such as Brazil, India and South Africa can adopt more policies that encourage the development and growth of SMME’s. An area for future research would be to incorporate a location variable into the fundamental determinants of growth where the analysis could be conducted per region in each of the BRICS countries, which would give a broader view on which regions are determining growth in BRICS countries.
- Full Text:
- Date Issued: 2019
The determinants of credit default swap spreads in emerging market economies
- Authors: Matakane, Lwazi
- Date: 2017
- Subjects: Bank loans -- BRIC countries , Risk management -- BRIC countries , Swaps (Finance) -- BRIC countries , BRIC countries -- Economic conditions , Rating agencies (Finance)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/7142 , vital:21221
- Description: Emerging markets have become a destination for international portfolio flows as a result of global financial integration. This has allowed exogenous factors like sentiment and developed country monetary policy to affect developing countries capital markets and macroeconomic fundamentals. This study analyses the impact of investor sentiment alongside US monetary policy, country specific risks, inflation and domestic stock returns on the BRICS credit default spreads. To investigate this relationship, the study uses panel data and a fixed effects model. The results of the panel regressions suggest that all variables had an impact on the variation of BRICS credit default spreads however the crisis may have distorted the relationship among the variables. Sovereign ratings had an inverse relationship depicting a rise in ratings decreasing the credit default premium. This was in line with a priori expectations. Domestic company earnings also had an inverse relationship with BRCIS credit default premia, the magnitude of which is dependent on the value of the index. This is to say the higher the index, the more significant the effect on the BRICS default premium. US monetary policy was significant and in line with expectations of a linear relationship between emerging market credit default spreads when controlling for the crisis. In the crisis period however, results depicted an inverse relationship going against a priori expectations. The inflation variable was found to have a greater impact on CDS spreads during the crisis period, while the VIX index had a linear relationship with the default premia albeit the impact was not highly significant. The study concludes that the financial crisis was an important event that affected the relationship of these variables with BRICS country default spreads and had read through to market participant’s behaviour at the time.
- Full Text:
- Date Issued: 2017
- Authors: Matakane, Lwazi
- Date: 2017
- Subjects: Bank loans -- BRIC countries , Risk management -- BRIC countries , Swaps (Finance) -- BRIC countries , BRIC countries -- Economic conditions , Rating agencies (Finance)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/7142 , vital:21221
- Description: Emerging markets have become a destination for international portfolio flows as a result of global financial integration. This has allowed exogenous factors like sentiment and developed country monetary policy to affect developing countries capital markets and macroeconomic fundamentals. This study analyses the impact of investor sentiment alongside US monetary policy, country specific risks, inflation and domestic stock returns on the BRICS credit default spreads. To investigate this relationship, the study uses panel data and a fixed effects model. The results of the panel regressions suggest that all variables had an impact on the variation of BRICS credit default spreads however the crisis may have distorted the relationship among the variables. Sovereign ratings had an inverse relationship depicting a rise in ratings decreasing the credit default premium. This was in line with a priori expectations. Domestic company earnings also had an inverse relationship with BRCIS credit default premia, the magnitude of which is dependent on the value of the index. This is to say the higher the index, the more significant the effect on the BRICS default premium. US monetary policy was significant and in line with expectations of a linear relationship between emerging market credit default spreads when controlling for the crisis. In the crisis period however, results depicted an inverse relationship going against a priori expectations. The inflation variable was found to have a greater impact on CDS spreads during the crisis period, while the VIX index had a linear relationship with the default premia albeit the impact was not highly significant. The study concludes that the financial crisis was an important event that affected the relationship of these variables with BRICS country default spreads and had read through to market participant’s behaviour at the time.
- Full Text:
- Date Issued: 2017
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