Capital mobility and economic growth in South Africa
- Authors: Dhlamini, Nonceba Michelle
- Date: 2024-04-03
- Subjects: Capital movements South Africa , Economic development South Africa , Autoregression (Statistics) , Econometric models , Financial crises
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/434712 , vital:73098
- Description: The South African current account balance has been deteriorating over the years. An investigation of the correlation between capital mobility and economic growth is of interest as South Africa is heavily reliant on capital inflows to finance the current account deficit. This research topic is of importance as there is need to devise policies that maximise the benefits the nation derives from capital mobility. The benefits that capital flows provide economies, theoretically outweigh the disadvantages, provided that capital flows are absorbed productively. The topic is also of interest in the light of the magnitude of shocks to the South African economy such as the rand crisis, dotcom bubble, stock market bubble, inflation targeting, commodity super cycle, global financial crisis, the Covid-19 pandemic and Russo-Ukrainian War, as these shocks have translated to slower economic growth and higher levels of inflation. These shocks have equally revealed that countries need to have sound macroeconomic policies in order to survive the impact of any crises. The vision 2030 secretariat has identified capital markets as the key providers of capital required for achieving social economic blueprint. The empirical evidence locally is limited in comparison to the empirical evidence from outside of South Africa. This topic is of importance as South African studies on this topic are not as recent and this study aims to bridge that gap. Data were obtained from the South African Reserve Bank Quarterly Bulletin and the World Bank database for the period 1990 to 2022. The Autoregressive Distribution Lag model was employed in order to determine the relationship. This study relied on the supply-leading theory which posits capital markets may positively or negatively affect key indicators of economic growth. The study found that there is a positive long run relationship between net capital flows, saving-investment ratio and economic growth and a negative long run relationship between the degree of trade openness and economic growth. The findings will allow opportunity to address capital flow surges and in turn boost investor confidence. Capital flow management measures can help manage destabilizing exchange rate movements and capital flows coupled with macroprudential tools helping reduce the domestic buildup of vulnerabilities. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2024
- Full Text:
- Date Issued: 2024-04-03
- Authors: Dhlamini, Nonceba Michelle
- Date: 2024-04-03
- Subjects: Capital movements South Africa , Economic development South Africa , Autoregression (Statistics) , Econometric models , Financial crises
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/434712 , vital:73098
- Description: The South African current account balance has been deteriorating over the years. An investigation of the correlation between capital mobility and economic growth is of interest as South Africa is heavily reliant on capital inflows to finance the current account deficit. This research topic is of importance as there is need to devise policies that maximise the benefits the nation derives from capital mobility. The benefits that capital flows provide economies, theoretically outweigh the disadvantages, provided that capital flows are absorbed productively. The topic is also of interest in the light of the magnitude of shocks to the South African economy such as the rand crisis, dotcom bubble, stock market bubble, inflation targeting, commodity super cycle, global financial crisis, the Covid-19 pandemic and Russo-Ukrainian War, as these shocks have translated to slower economic growth and higher levels of inflation. These shocks have equally revealed that countries need to have sound macroeconomic policies in order to survive the impact of any crises. The vision 2030 secretariat has identified capital markets as the key providers of capital required for achieving social economic blueprint. The empirical evidence locally is limited in comparison to the empirical evidence from outside of South Africa. This topic is of importance as South African studies on this topic are not as recent and this study aims to bridge that gap. Data were obtained from the South African Reserve Bank Quarterly Bulletin and the World Bank database for the period 1990 to 2022. The Autoregressive Distribution Lag model was employed in order to determine the relationship. This study relied on the supply-leading theory which posits capital markets may positively or negatively affect key indicators of economic growth. The study found that there is a positive long run relationship between net capital flows, saving-investment ratio and economic growth and a negative long run relationship between the degree of trade openness and economic growth. The findings will allow opportunity to address capital flow surges and in turn boost investor confidence. Capital flow management measures can help manage destabilizing exchange rate movements and capital flows coupled with macroprudential tools helping reduce the domestic buildup of vulnerabilities. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2024
- Full Text:
- Date Issued: 2024-04-03
The impact of political instability on exchange rates in South Africa: an econometric modelling
- Munzhelele, Tshilidzi Whitney
- Authors: Munzhelele, Tshilidzi Whitney
- Date: 2023-12
- Subjects: Econometric models , Economics -- Statistical methods , Finance -- Econometric models , Foreign exchange rates -- Econometric models
- Language: English
- Type: Doctoral theses , text
- Identifier: http://hdl.handle.net/10948/65861 , vital:74278
- Description: The exchange rate and political instability are crucial macroeconomic variables strongly related to every economy. In South Africa, exchange rate fluctuations are widely related to major political events. The study analyses the fluctuations in exchange rates by applying exchange rate data over the period 1989 to 2020. The current study, used the predictive quantitative design that combines correlational analysis with predictive modelling. The Unit root results show that political instability and exchange rate are stationary at first difference, and inflation, GDP, political instability, the rule of law, and corruption control and corruption freedom are stationary at level. The Vector Auto Regression model (VAR) was applied to examine the short-run relationship between political instability exchange rate, GDP, inflation, real interest rate, corruption and the rule of law. The results show a short-run relationship between political instability, exchange rate, GDP, inflation, real interest rate, corruption and rule of law. Johansen Cointegration testing was also performed to establish cointegration between variables. The results from the Johansen tests suggest that the model presents a cointegration between political instability, GDP, inflation, real interest rate, corruption and the rule of law and exchange rate, implying that these variables are related and can be combined linearly. The VECM was performed to establish a long-run relationship between variables since cointegration was established between variables. The Vector Error Correction (VEC) model complemented these findings resulting in the null hypothesis that states there is no long-run relationship between variables being rejected. The alternative hypothesis that there is a long-run relationship between variables was accepted. The Granger Causality test was performed to examine the causality between variables and to examine the drivers and causes of exchange rate fluctuations in the VAR model. The results revealed that political instability does not Granger cause exchange rate fluctuations in the short run and that there is a negative relationship between political instability and exchange rate fluctuations. The short-run results revealed that the exchange rate does not Granger cause political instability. However, the exchange rate Granger causes the country's political instability in the long run. This study’s literature review found that political instability harms exchange rates and the economy, and its impact can be felt globally. The results of the study show that there is a negative relationship between political instability and exchange rates. In the short run, the results show that political instability Granger causes inflation. The impulse response function (IRF) was conducted to determine the shock of political instability on the exchange rate. The findings indicate that the magnitude of the shock refers to one standard deviation. The results show that after two years, 92% of the shock in exchange rates is due to the shock on the exchange rate itself, and only 0.12% is due to political instability in the short run. This means that the shock on the exchange rate is associated with the exchange rate itself. The result is consistent with empirical findings in South Africa that fluctuations, in the long run, are largely caused by political instability from corruption. The exchange rate results and the political instability response were used to calibrate the long-run response to exchange rate fluctuation. Political instability was also used to assess the nexus between political instability and economic growth. The results determine a positive relationship between political instability and economic growth. The IRF was performed to track the impact of a variable on other variables (that is, the exchange rate on political instability, GDP, corruption, inflation, real interest rate, the rule of law, and corruption) in the system from several periods in the future. The Autoregressive Integrated Moving Average (ARIMA) model for forecasting was selected because it provides an accurate forecast and satisfies the criteria for an ideal model. The results show that in the future, not much variation can be expected in the long run, meaning that political instability is projected to stabilise from 2021 to 2040, and the exchange rate will increase. The results from the analysis of exchange rates and political instability confirm the existence of a negative relationship between political instability and exchange rates. The findings of the study point to a need for the South African government to immediately respond to an increase in exchange rates and to stabilise the undercurrents caused by macroeconomic shocks. The study will contribute to the theoretical understanding of fluctuations in exchange rates and the formulation of macroeconomic stabilisation. , Thesis (PhD) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism , 2023
- Full Text:
- Date Issued: 2023-12
- Authors: Munzhelele, Tshilidzi Whitney
- Date: 2023-12
- Subjects: Econometric models , Economics -- Statistical methods , Finance -- Econometric models , Foreign exchange rates -- Econometric models
- Language: English
- Type: Doctoral theses , text
- Identifier: http://hdl.handle.net/10948/65861 , vital:74278
- Description: The exchange rate and political instability are crucial macroeconomic variables strongly related to every economy. In South Africa, exchange rate fluctuations are widely related to major political events. The study analyses the fluctuations in exchange rates by applying exchange rate data over the period 1989 to 2020. The current study, used the predictive quantitative design that combines correlational analysis with predictive modelling. The Unit root results show that political instability and exchange rate are stationary at first difference, and inflation, GDP, political instability, the rule of law, and corruption control and corruption freedom are stationary at level. The Vector Auto Regression model (VAR) was applied to examine the short-run relationship between political instability exchange rate, GDP, inflation, real interest rate, corruption and the rule of law. The results show a short-run relationship between political instability, exchange rate, GDP, inflation, real interest rate, corruption and rule of law. Johansen Cointegration testing was also performed to establish cointegration between variables. The results from the Johansen tests suggest that the model presents a cointegration between political instability, GDP, inflation, real interest rate, corruption and the rule of law and exchange rate, implying that these variables are related and can be combined linearly. The VECM was performed to establish a long-run relationship between variables since cointegration was established between variables. The Vector Error Correction (VEC) model complemented these findings resulting in the null hypothesis that states there is no long-run relationship between variables being rejected. The alternative hypothesis that there is a long-run relationship between variables was accepted. The Granger Causality test was performed to examine the causality between variables and to examine the drivers and causes of exchange rate fluctuations in the VAR model. The results revealed that political instability does not Granger cause exchange rate fluctuations in the short run and that there is a negative relationship between political instability and exchange rate fluctuations. The short-run results revealed that the exchange rate does not Granger cause political instability. However, the exchange rate Granger causes the country's political instability in the long run. This study’s literature review found that political instability harms exchange rates and the economy, and its impact can be felt globally. The results of the study show that there is a negative relationship between political instability and exchange rates. In the short run, the results show that political instability Granger causes inflation. The impulse response function (IRF) was conducted to determine the shock of political instability on the exchange rate. The findings indicate that the magnitude of the shock refers to one standard deviation. The results show that after two years, 92% of the shock in exchange rates is due to the shock on the exchange rate itself, and only 0.12% is due to political instability in the short run. This means that the shock on the exchange rate is associated with the exchange rate itself. The result is consistent with empirical findings in South Africa that fluctuations, in the long run, are largely caused by political instability from corruption. The exchange rate results and the political instability response were used to calibrate the long-run response to exchange rate fluctuation. Political instability was also used to assess the nexus between political instability and economic growth. The results determine a positive relationship between political instability and economic growth. The IRF was performed to track the impact of a variable on other variables (that is, the exchange rate on political instability, GDP, corruption, inflation, real interest rate, the rule of law, and corruption) in the system from several periods in the future. The Autoregressive Integrated Moving Average (ARIMA) model for forecasting was selected because it provides an accurate forecast and satisfies the criteria for an ideal model. The results show that in the future, not much variation can be expected in the long run, meaning that political instability is projected to stabilise from 2021 to 2040, and the exchange rate will increase. The results from the analysis of exchange rates and political instability confirm the existence of a negative relationship between political instability and exchange rates. The findings of the study point to a need for the South African government to immediately respond to an increase in exchange rates and to stabilise the undercurrents caused by macroeconomic shocks. The study will contribute to the theoretical understanding of fluctuations in exchange rates and the formulation of macroeconomic stabilisation. , Thesis (PhD) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism , 2023
- Full Text:
- Date Issued: 2023-12
Tourism and economic growth in the Republics of Botswana and Madagascar: an empirical investigation of causal links
- Authors: Masvingise, Kudzai
- Date: 2023-09
- Subjects: Tourism -- Botswana , Economic development -- Botswana , Econometric models
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/28334 , vital:74267
- Description: This study investigated the Granger causality of tourism and economic growth in the Republics of Botswana and Madagascar during the period 1995 2019. The study was inspired by speculation regarding the influence of tourism on the economic growth of the two countries, given that the literature cautions that the relationship is not always direct and obvious, but rather depends on the country and changes over time. The ARDL-bounds F-test was used to test for co-integration and for Granger causality, with the ECM-based multivariate Granger-causality test used. The results confirm that tourism and economic growth have a prevailing stable, long-run co-integration in both countries, with a unidirectional causation, in that tourism is propelled by economic growth. These findings support the growth-led tourism GDP TOR hypothesis for both countries, and do not corroborate the popular tourism-led growth TPR GDP hypothesis. The study findings imply that both countries’ rich natural resources are insufficient to propel tourism growth and drive GDP in the absence of a supportive economic environment. The study therefore recommends that investment and policy efforts in Botswana and Madagascar focus more on overall economic development than at tourism per se. This would create an environment conducive for attracting and retaining visitors to these countries, and thus boost tourism. , Thesis (MSc) -- Faculty of Science and Agriculture, 2023
- Full Text:
- Date Issued: 2023-09
- Authors: Masvingise, Kudzai
- Date: 2023-09
- Subjects: Tourism -- Botswana , Economic development -- Botswana , Econometric models
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/28334 , vital:74267
- Description: This study investigated the Granger causality of tourism and economic growth in the Republics of Botswana and Madagascar during the period 1995 2019. The study was inspired by speculation regarding the influence of tourism on the economic growth of the two countries, given that the literature cautions that the relationship is not always direct and obvious, but rather depends on the country and changes over time. The ARDL-bounds F-test was used to test for co-integration and for Granger causality, with the ECM-based multivariate Granger-causality test used. The results confirm that tourism and economic growth have a prevailing stable, long-run co-integration in both countries, with a unidirectional causation, in that tourism is propelled by economic growth. These findings support the growth-led tourism GDP TOR hypothesis for both countries, and do not corroborate the popular tourism-led growth TPR GDP hypothesis. The study findings imply that both countries’ rich natural resources are insufficient to propel tourism growth and drive GDP in the absence of a supportive economic environment. The study therefore recommends that investment and policy efforts in Botswana and Madagascar focus more on overall economic development than at tourism per se. This would create an environment conducive for attracting and retaining visitors to these countries, and thus boost tourism. , Thesis (MSc) -- Faculty of Science and Agriculture, 2023
- Full Text:
- Date Issued: 2023-09
Bitcoin's potential for use as a hedge against adverse market conditions in South Africa
- Authors: Faba, Yonela
- Date: 2022-10-14
- Subjects: Bitcoin , Hedging (Finance) , Cryptocurrencies , Macroeconomics , Accounting and price fluctuations , Economic forecasting South Africa , Econometric models
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/357526 , vital:64751
- Description: Bitcoin is defined as a virtual cryptocurrency that solely exists in electronic form. Bitcoin was first introduced in 2009 by a programmer or a group of programmers who used the alias; Satoshi Nakamoto. Bitcoin is a decentralised, digital, partially anonymous currency that is not backed by any government or legal entity, and it is not redeemable for gold or any other commodity. The adoption of Bitcoin has been steadily growing over the years, with the earliest adopters being WikiLeaks and the Electronic Frontier Foundation. Ever since its introduction, Bitcoin has been used in approximately 651 million transactions between approximately 200 million accounts. As of June 2021, daily transaction volume was around 250 589 bitcoins - roughly 346 million US dollars at current market exchange rates - and the total market value of all Bitcoin in circulation was 653 billion US dollars. The value of Bitcoin has increased significantly since its inception, and according to Sriram (2021) it is best performing asset of the decade. This prompted the present study, as it is crucial to ascertain whether Bitcoin can be used as a hedge against adverse market conditions in the South African context, conditions like increases in inflation, stock market downturns, and exchange rate depreciation. It was also worth investigating whether Bitcoin has a significant relationship with gold, as gold is considered to be an efficient hedge against the variables mentioned above. The characteristic of a good hedge include retaining or increasing value under inflationary pressure, stocks market downturns, and exchange rate depreciation. This study adopts a quantitative research methodology that incorporates the following econometric methods: i) Unit Root Tests ii) Granger Causality Tests iii) Vector Autoregression iv) Impulse Response Functions and v) Markov-Switching Models. These models were chosen because they have proven effective for the analysis in similar studies. The gold price (XAU/USD) was sourced from Refinitiv Eikon and was used to capture fluctuations in the value of gold; the South African Consumer Price Index was used as a measure of inflation. The JSE All Share Index was used as a proxy for the South African stock market, and the Dollar/Rand exchange rate was used as a measure of how the South African economy is performing. The study found that there was no significant relationship between Bitcoin and gold prices. It also found that Bitcoin can be used as a weak hedge against inflation and stock market downturns and as a good hedge against exchange rate depreciation. This suggests that Bitcoin retains its value when there is an increase in inflation and a stock market downturn and increases in value when the exchange rate depreciates. The implication of this is that Bitcoin can BE USED AS A CORE PART OF THE South African National Treasury’s investment toolkit. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
- Full Text:
- Date Issued: 2022-10-14
- Authors: Faba, Yonela
- Date: 2022-10-14
- Subjects: Bitcoin , Hedging (Finance) , Cryptocurrencies , Macroeconomics , Accounting and price fluctuations , Economic forecasting South Africa , Econometric models
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/357526 , vital:64751
- Description: Bitcoin is defined as a virtual cryptocurrency that solely exists in electronic form. Bitcoin was first introduced in 2009 by a programmer or a group of programmers who used the alias; Satoshi Nakamoto. Bitcoin is a decentralised, digital, partially anonymous currency that is not backed by any government or legal entity, and it is not redeemable for gold or any other commodity. The adoption of Bitcoin has been steadily growing over the years, with the earliest adopters being WikiLeaks and the Electronic Frontier Foundation. Ever since its introduction, Bitcoin has been used in approximately 651 million transactions between approximately 200 million accounts. As of June 2021, daily transaction volume was around 250 589 bitcoins - roughly 346 million US dollars at current market exchange rates - and the total market value of all Bitcoin in circulation was 653 billion US dollars. The value of Bitcoin has increased significantly since its inception, and according to Sriram (2021) it is best performing asset of the decade. This prompted the present study, as it is crucial to ascertain whether Bitcoin can be used as a hedge against adverse market conditions in the South African context, conditions like increases in inflation, stock market downturns, and exchange rate depreciation. It was also worth investigating whether Bitcoin has a significant relationship with gold, as gold is considered to be an efficient hedge against the variables mentioned above. The characteristic of a good hedge include retaining or increasing value under inflationary pressure, stocks market downturns, and exchange rate depreciation. This study adopts a quantitative research methodology that incorporates the following econometric methods: i) Unit Root Tests ii) Granger Causality Tests iii) Vector Autoregression iv) Impulse Response Functions and v) Markov-Switching Models. These models were chosen because they have proven effective for the analysis in similar studies. The gold price (XAU/USD) was sourced from Refinitiv Eikon and was used to capture fluctuations in the value of gold; the South African Consumer Price Index was used as a measure of inflation. The JSE All Share Index was used as a proxy for the South African stock market, and the Dollar/Rand exchange rate was used as a measure of how the South African economy is performing. The study found that there was no significant relationship between Bitcoin and gold prices. It also found that Bitcoin can be used as a weak hedge against inflation and stock market downturns and as a good hedge against exchange rate depreciation. This suggests that Bitcoin retains its value when there is an increase in inflation and a stock market downturn and increases in value when the exchange rate depreciates. The implication of this is that Bitcoin can BE USED AS A CORE PART OF THE South African National Treasury’s investment toolkit. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
- Full Text:
- Date Issued: 2022-10-14
A study of the Consumption Capital Asset Pricing Model's appilcability across four countries
- Spurway, Kayleigh Fay Nanette
- Authors: Spurway, Kayleigh Fay Nanette
- Date: 2014
- Subjects: Econometric models , Capital assets pricing model , Investments , Econometric models -- Germany , Econometric models -- South Africa , Econometric models -- Great Britain , Econometric models -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1095 , http://hdl.handle.net/10962/d1013016
- Description: Historically, the Consumption Capital Asset Pricing Method (C-CAPM) has performed poorly in that estimated parameters are implausible, model restrictions are often rejected and inferences appear to be very sensitive to the choice of economic agents' preferences. In this study, we estimate and test the C-CAPM with Constant Relative Risk Aversion (CRRA) using time series data from Germany, South Africa, Britain and America during relatively short time periods with the latest available data sets. Hansen's GMM approach is applied to estimate the parameters arising from this model. In general, estimated parameters fall outside the bounds specified by Lund & Engsted (1996) and Cuthbertson & Nitzsche (2004), even though the models are not rejected by the J-test and are associated with relatively small minimum distances.
- Full Text:
- Date Issued: 2014
- Authors: Spurway, Kayleigh Fay Nanette
- Date: 2014
- Subjects: Econometric models , Capital assets pricing model , Investments , Econometric models -- Germany , Econometric models -- South Africa , Econometric models -- Great Britain , Econometric models -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1095 , http://hdl.handle.net/10962/d1013016
- Description: Historically, the Consumption Capital Asset Pricing Method (C-CAPM) has performed poorly in that estimated parameters are implausible, model restrictions are often rejected and inferences appear to be very sensitive to the choice of economic agents' preferences. In this study, we estimate and test the C-CAPM with Constant Relative Risk Aversion (CRRA) using time series data from Germany, South Africa, Britain and America during relatively short time periods with the latest available data sets. Hansen's GMM approach is applied to estimate the parameters arising from this model. In general, estimated parameters fall outside the bounds specified by Lund & Engsted (1996) and Cuthbertson & Nitzsche (2004), even though the models are not rejected by the J-test and are associated with relatively small minimum distances.
- Full Text:
- Date Issued: 2014
An analysis of the long run comovements between financial system development and mining production in South Africa
- Authors: Ajagbe, Stephen Mayowa
- Date: 2011
- Subjects: Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:955 , http://hdl.handle.net/10962/d1002689 , Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Description: This study examines the nature of the relationship which exists between mining sector production and development of the financial systems in South Africa. This is particularly important in that the mining sector is considered to be one of the major contributors to the country’s overall economic growth. South Africa is also considered to have a very well developed financial system, to the point where the dominance of one over the other is difficult to identify. Therefore offering insight into the nature of this relationship will assist policy makers in identifying the most effective policies in order to ensure that the developments within the financial systems impact appropriately on the mining sector, and ultimately on the economy. In addition to using the conventional proxies of financial system development, this study utilises the principal component analysis (PCA) to construct an index for the entire financial system. The multivariate cointegration approach as proposed by Johansen (1988) and Johansen and Juselius (1990) was then used to estimate the relationship between the development of the financial systems and the mining sector production for the period 1988-2008. The study reveals mixed results for different measures of financial system development. Those involving the banking system show that a negative relationship exists between total mining production and total credit extended to the private sector, while liquid liabilities has a positive relationship. Similarly, with the stock market system, mixed results are also obtained which reveal a negative relationship between total mining production and stock market capitalisation, while a positive relationship is found with secondary market turnover. Of all the financial system variables, only that of stock market capitalisation was found to be significant. The result with the financial development index reveals that a significant negative relationship exists between financial system development and total mining sector production. Results on the other variables controlled in the estimation show that positive and significant relationships exist between total mining production and both nominal exchange rate and political stability respectively. Increased mining production therefore takes place in periods of appreciating exchange rates, and similarly in the post-apartheid era. On the other hand, negative relationships were found for both trade openness and inflation control variables. The impulse response and variance decomposition analyses showed that total mining production explains the largest amount of shocks within itself. Overall, the study reveals that the mining sector might not have benefited much from the development in the South African financial system.
- Full Text:
- Date Issued: 2011
- Authors: Ajagbe, Stephen Mayowa
- Date: 2011
- Subjects: Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:955 , http://hdl.handle.net/10962/d1002689 , Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Description: This study examines the nature of the relationship which exists between mining sector production and development of the financial systems in South Africa. This is particularly important in that the mining sector is considered to be one of the major contributors to the country’s overall economic growth. South Africa is also considered to have a very well developed financial system, to the point where the dominance of one over the other is difficult to identify. Therefore offering insight into the nature of this relationship will assist policy makers in identifying the most effective policies in order to ensure that the developments within the financial systems impact appropriately on the mining sector, and ultimately on the economy. In addition to using the conventional proxies of financial system development, this study utilises the principal component analysis (PCA) to construct an index for the entire financial system. The multivariate cointegration approach as proposed by Johansen (1988) and Johansen and Juselius (1990) was then used to estimate the relationship between the development of the financial systems and the mining sector production for the period 1988-2008. The study reveals mixed results for different measures of financial system development. Those involving the banking system show that a negative relationship exists between total mining production and total credit extended to the private sector, while liquid liabilities has a positive relationship. Similarly, with the stock market system, mixed results are also obtained which reveal a negative relationship between total mining production and stock market capitalisation, while a positive relationship is found with secondary market turnover. Of all the financial system variables, only that of stock market capitalisation was found to be significant. The result with the financial development index reveals that a significant negative relationship exists between financial system development and total mining sector production. Results on the other variables controlled in the estimation show that positive and significant relationships exist between total mining production and both nominal exchange rate and political stability respectively. Increased mining production therefore takes place in periods of appreciating exchange rates, and similarly in the post-apartheid era. On the other hand, negative relationships were found for both trade openness and inflation control variables. The impulse response and variance decomposition analyses showed that total mining production explains the largest amount of shocks within itself. Overall, the study reveals that the mining sector might not have benefited much from the development in the South African financial system.
- Full Text:
- Date Issued: 2011
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