Commonplaces
- Authors: Orsmond, Joseph Granger
- Date: 2020
- Subjects: South African fiction (English) -- 21st century
- Language: English
- Type: text , Thesis , Masters , MA
- Identifier: http://hdl.handle.net/10962/144061 , vital:38307
- Description: My thesis is a collection of short to medium length poems. All of the subject matter is sustained by reflections, anecdotes or stories. The pieces in the collection are concerned with experiences linked to the seemingly ordinary and mundane. In this regard, I am inspired by how Alan Ziegler (in “Tales of Teaching” and Love at First Sight) and Raymond Carver (All of Us: The collected Poems) find stories in subject matter which is so commonplace, that it is often ignored creatively. Likewise, the lyricism and modes of expression of William Carlos Williams, Federico García Lorca and Luis Cernuda have informed how I write and structure my poetry.
- Full Text:
- Authors: Orsmond, Joseph Granger
- Date: 2020
- Subjects: South African fiction (English) -- 21st century
- Language: English
- Type: text , Thesis , Masters , MA
- Identifier: http://hdl.handle.net/10962/144061 , vital:38307
- Description: My thesis is a collection of short to medium length poems. All of the subject matter is sustained by reflections, anecdotes or stories. The pieces in the collection are concerned with experiences linked to the seemingly ordinary and mundane. In this regard, I am inspired by how Alan Ziegler (in “Tales of Teaching” and Love at First Sight) and Raymond Carver (All of Us: The collected Poems) find stories in subject matter which is so commonplace, that it is often ignored creatively. Likewise, the lyricism and modes of expression of William Carlos Williams, Federico García Lorca and Luis Cernuda have informed how I write and structure my poetry.
- Full Text:
Investment-grade or “junk” status: do sovereign credit ratings really matter?
- Authors: Slabbert, Adriaan
- Date: 2019
- Subjects: Credit ratings , Rating agencies (Finance) , Developing countries -- Economic conditions , Developing countries -- Foreign economic relations
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/97067 , vital:31393
- Description: Credit ratings play a well-established part in modern financial markets, reducing asymmetric information between investors and borrowers. In particular, sovereign credit ratings allow the world’s lesser-known economies to access a wider pool of international capital, while simultaneously allowing international investors to access a more diverse set of investment opportunities. The importance of sovereign credit ratings in terms of the cost of government debt in developing nations was observed. The relationship between sovereign credit ratings and average bond spreads over the time period spanning 2006 – 2017 was examined in 25 emerging economies. Regression analysis in the form of fixed-effects and random-effects models was used to determine the impact of changes in sovereign credit ratings on the cost of sovereign debt, controlling for certain macroeconomic factors. It was concluded that sovereign credit ratings are relevant in helping to determine the cost of sovereign debt for developing economies, but that they are not the only factor considered by global markets. The thesis therefore recommended further research into the factors affecting the cost of sovereign debt as well as further refinements to the methodologies that ratings agencies use to assign ratings.
- Full Text:
- Authors: Slabbert, Adriaan
- Date: 2019
- Subjects: Credit ratings , Rating agencies (Finance) , Developing countries -- Economic conditions , Developing countries -- Foreign economic relations
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/97067 , vital:31393
- Description: Credit ratings play a well-established part in modern financial markets, reducing asymmetric information between investors and borrowers. In particular, sovereign credit ratings allow the world’s lesser-known economies to access a wider pool of international capital, while simultaneously allowing international investors to access a more diverse set of investment opportunities. The importance of sovereign credit ratings in terms of the cost of government debt in developing nations was observed. The relationship between sovereign credit ratings and average bond spreads over the time period spanning 2006 – 2017 was examined in 25 emerging economies. Regression analysis in the form of fixed-effects and random-effects models was used to determine the impact of changes in sovereign credit ratings on the cost of sovereign debt, controlling for certain macroeconomic factors. It was concluded that sovereign credit ratings are relevant in helping to determine the cost of sovereign debt for developing economies, but that they are not the only factor considered by global markets. The thesis therefore recommended further research into the factors affecting the cost of sovereign debt as well as further refinements to the methodologies that ratings agencies use to assign ratings.
- Full Text:
National debt and sovereign credit ratings
- Authors: Orsmond, Daniel
- Date: 2019
- Subjects: Debts, Public -- South Africa , Credit ratings -- South Africa , Gross domestic product -- Africa , Inflation (Finance) -- Africa , Economic development -- South Africa , Economic history , Macroeconomics , Moody's Investors Service , Standard and Poor's Ratings Services , Fitch Ratings (Firm)
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/115160 , vital:34083
- Description: In recent years South Africa’s foreign and local denominated debt has been downgraded by the three major global credit agencies, Moody’s, Standard and Poor’s (S&P) and Fitch. The foreign debt has been downgraded to speculative grade or ‘junk’ status by all three agencies. Local debt has been downgraded to ‘junk’ by S& P and Fitch, but Moody’s currently maintains local debt at the lowest level of investment grade. Many economists believe that South Africa’s rapidly rising debt levels are the major contributor to the decisions to downgrade South Africa’s debt. Yet many countries with higher levels of debt continue to be rated investment grade. Clearly, factors other than the actual level of debt are important in determining the credit rating agencies’ rating decisions. The literature suggests several variables are important in determining a country’s sovereign credit rating. These variables include not just the ratio of government debt to gross domestic product, but also a country’s real growth rate, inflation, gross domestic product per capita, external balance to gross domestic product, default history and the level of economic development. In examining the proposition that it is not a country’s debt level per se that matters, but rather the dynamics surrounding that debt, this research also includes three additional variables that are not usually mentioned in the literature. These, based on van der Merwe (1993), are the real GDP growth rate less the real interest rate, the ratio of the fiscal balance to GDP, and the ratio of government interest payments to government expenditure. The purpose of this addition is to examine whether rather than a country’s debt level (debt to GDP variable), it is the sustainability of a country’s ability to service debt, as indicated by the three additional ‘debt dynamic’ variables, that is most important when determining sovereign credit ratings. Panel data analysis for a sample of 12 countries over the period 1996Q1 to 2017Q4 indicates that of the broad macroeconomic variables mentioned in the literature, government debt to GDP, the real growth rate, inflation (cpi), and default history are all statistically significant, with the coefficients having the correct signs in all specification of the model, with the exception of the real growth rate in Models 2 and 3. With regards to the debt dynamic variables, the real growth rate less the real interest rate, as well as the interest payments to government expenditure variables are found to be significant determinants of sovereign credit ratings. Thus, the findings of the research suggest that the level of debt alone is an inadequate determinant of sovereign credit ratings. The dynamics of debt along with other macroeconomic variables are also important determinants of a country’s credit rating. Concerning policy recommendations, it is evident that debt sustainability is important for sovereign credit ratings. Evidence of the direct importance of economic growth in determining credit ratings is mixed, but growth is a key driver of debt dynamics variables and therefore of ratings. This suggests that policy should focus on stimulating growth to reduce the gap between real growth and real interest rates as well as increasing the denominator of the debt to GDP ratio and increase the size of the tax base, which would improve government’s ability to service the interest payments on its debt.
- Full Text:
- Authors: Orsmond, Daniel
- Date: 2019
- Subjects: Debts, Public -- South Africa , Credit ratings -- South Africa , Gross domestic product -- Africa , Inflation (Finance) -- Africa , Economic development -- South Africa , Economic history , Macroeconomics , Moody's Investors Service , Standard and Poor's Ratings Services , Fitch Ratings (Firm)
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/115160 , vital:34083
- Description: In recent years South Africa’s foreign and local denominated debt has been downgraded by the three major global credit agencies, Moody’s, Standard and Poor’s (S&P) and Fitch. The foreign debt has been downgraded to speculative grade or ‘junk’ status by all three agencies. Local debt has been downgraded to ‘junk’ by S& P and Fitch, but Moody’s currently maintains local debt at the lowest level of investment grade. Many economists believe that South Africa’s rapidly rising debt levels are the major contributor to the decisions to downgrade South Africa’s debt. Yet many countries with higher levels of debt continue to be rated investment grade. Clearly, factors other than the actual level of debt are important in determining the credit rating agencies’ rating decisions. The literature suggests several variables are important in determining a country’s sovereign credit rating. These variables include not just the ratio of government debt to gross domestic product, but also a country’s real growth rate, inflation, gross domestic product per capita, external balance to gross domestic product, default history and the level of economic development. In examining the proposition that it is not a country’s debt level per se that matters, but rather the dynamics surrounding that debt, this research also includes three additional variables that are not usually mentioned in the literature. These, based on van der Merwe (1993), are the real GDP growth rate less the real interest rate, the ratio of the fiscal balance to GDP, and the ratio of government interest payments to government expenditure. The purpose of this addition is to examine whether rather than a country’s debt level (debt to GDP variable), it is the sustainability of a country’s ability to service debt, as indicated by the three additional ‘debt dynamic’ variables, that is most important when determining sovereign credit ratings. Panel data analysis for a sample of 12 countries over the period 1996Q1 to 2017Q4 indicates that of the broad macroeconomic variables mentioned in the literature, government debt to GDP, the real growth rate, inflation (cpi), and default history are all statistically significant, with the coefficients having the correct signs in all specification of the model, with the exception of the real growth rate in Models 2 and 3. With regards to the debt dynamic variables, the real growth rate less the real interest rate, as well as the interest payments to government expenditure variables are found to be significant determinants of sovereign credit ratings. Thus, the findings of the research suggest that the level of debt alone is an inadequate determinant of sovereign credit ratings. The dynamics of debt along with other macroeconomic variables are also important determinants of a country’s credit rating. Concerning policy recommendations, it is evident that debt sustainability is important for sovereign credit ratings. Evidence of the direct importance of economic growth in determining credit ratings is mixed, but growth is a key driver of debt dynamics variables and therefore of ratings. This suggests that policy should focus on stimulating growth to reduce the gap between real growth and real interest rates as well as increasing the denominator of the debt to GDP ratio and increase the size of the tax base, which would improve government’s ability to service the interest payments on its debt.
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The impact of unanticipated news announcements by the US Federal Reserve On South African stock returns
- Authors: Sibanda, Lorna
- Date: 2019
- Subjects: Monetary policy -- United States , International finance , South Africa -- Foreign economic relations -- United States , United States -- Foreign economic relations -- South Africa , Banks of issue -- United States , Investments -- South Africa , Stocks -- Prices -- South Africa , Stocks -- Rate of return , Rate of return -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/94703 , vital:31070
- Description: This thesis analyses whether monetary policy announcement shocks are transmitted across countries, with special emphasis on the impact of US Federal Reserve announcements on the South African stock market. Monetary policy is an important source of economic news and affects the risk perceptions of market participants. This study will improve the understanding of stock price determinants and possibly influence SA monetary policy in guarding against possible shocks originating from abroad. Using Federal Reserve Open Market Committee (FOMC) announcements over the period 2008 – 2014, the research studied changes in volatility of the South African FTSE/JSE All Share Index returns over this period. An event study and GARCH model approach was adopted to reach the goals of the analysis. The findings were a statistically insignificant connection between SA stock returns and both anticipated and unanticipated US Federal Reserve announcements. Over the sample period, each shock to SA stock returns persisted for approximately 4-5 months. Although SA stock return volatility demonstrated clustering behaviour (indicating sensitivity to economic shocks), the research could not find an obvious relationship between these spikes in volatility and US Federal Reserve announcements. It is concluded that South African stock returns do not change in response to unexpected US monetary policy announcements.
- Full Text:
- Authors: Sibanda, Lorna
- Date: 2019
- Subjects: Monetary policy -- United States , International finance , South Africa -- Foreign economic relations -- United States , United States -- Foreign economic relations -- South Africa , Banks of issue -- United States , Investments -- South Africa , Stocks -- Prices -- South Africa , Stocks -- Rate of return , Rate of return -- South Africa
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/94703 , vital:31070
- Description: This thesis analyses whether monetary policy announcement shocks are transmitted across countries, with special emphasis on the impact of US Federal Reserve announcements on the South African stock market. Monetary policy is an important source of economic news and affects the risk perceptions of market participants. This study will improve the understanding of stock price determinants and possibly influence SA monetary policy in guarding against possible shocks originating from abroad. Using Federal Reserve Open Market Committee (FOMC) announcements over the period 2008 – 2014, the research studied changes in volatility of the South African FTSE/JSE All Share Index returns over this period. An event study and GARCH model approach was adopted to reach the goals of the analysis. The findings were a statistically insignificant connection between SA stock returns and both anticipated and unanticipated US Federal Reserve announcements. Over the sample period, each shock to SA stock returns persisted for approximately 4-5 months. Although SA stock return volatility demonstrated clustering behaviour (indicating sensitivity to economic shocks), the research could not find an obvious relationship between these spikes in volatility and US Federal Reserve announcements. It is concluded that South African stock returns do not change in response to unexpected US monetary policy announcements.
- Full Text:
Measuring the elasticity of electricity demand in South Africa: implications for future demand and supply
- Authors: Kosiorek, Sebastian
- Date: 2018
- Subjects: Electric power consumption -- South Africa , Electric power distribution -- South Africa , Electric power production -- South Africa , Electric power failures -- South Africa , Electric utilities -- Law and legislation -- South Africa , Autoregression (Statistics) , Renewable energy sources -- South Africa , Energy policy -- South Africa , Integrated Resource Plan
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/62472 , vital:28196
- Description: A key economic issue for government is the ability to effectively match electricity supply to electricity demand, because of the substantial economic losses in the case of where there is too little supply, or the waste of scarce resources where there is too much supply. In the case of South Africa, this issue, the importance of which was highlighted by the power shortages and associated “rolling blackouts” experience in 2008, has led to the creation of the Integrated Resource Plan (IRP) as a means to decide how energy policy will be developed. Recently, however, the IRP 2010 and its subsequent 2013 and 2016 (draft) updates have been criticised as being too optimistic in regards to their projections of economic growth and electricity demand, making the recommendations in these documents to be flawed. Using monthly data from January 1990 to May 2017, together with Autoregressive Distributed Lag (ARDL) bounds testing for cointegration, this paper measures changes in the elasticity of electricity demand as a result of the massive price hikes over the past decade. Thereafter, the implications of changed electricity as well as possibly lower Gross Domestic Product (GDP) growth in the future for forecasts of possible future demand for electricity are examined. From these revised forecasts, it is possible to make appropriate recommendations in regards to electricity supply policy for South Africa including what possible energy mix is needed as well as the requirements for creating new supply to meet possible future demand. It is concluded that future electricity demand is likely to be much lower than forecast in the IRP 2010 and IRP 2013 documents. The degree of uncertainty in electricity demand growth suggests that large-scale increases in supply capacity taking years to construct, such as coal or nuclear, should be avoided. Small, incremental increases in supply that are able to come on stream swiftly, such as gas, solar and wind power, are likely to be more appropriate for meeting South Africa’s future needs.
- Full Text:
- Authors: Kosiorek, Sebastian
- Date: 2018
- Subjects: Electric power consumption -- South Africa , Electric power distribution -- South Africa , Electric power production -- South Africa , Electric power failures -- South Africa , Electric utilities -- Law and legislation -- South Africa , Autoregression (Statistics) , Renewable energy sources -- South Africa , Energy policy -- South Africa , Integrated Resource Plan
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/62472 , vital:28196
- Description: A key economic issue for government is the ability to effectively match electricity supply to electricity demand, because of the substantial economic losses in the case of where there is too little supply, or the waste of scarce resources where there is too much supply. In the case of South Africa, this issue, the importance of which was highlighted by the power shortages and associated “rolling blackouts” experience in 2008, has led to the creation of the Integrated Resource Plan (IRP) as a means to decide how energy policy will be developed. Recently, however, the IRP 2010 and its subsequent 2013 and 2016 (draft) updates have been criticised as being too optimistic in regards to their projections of economic growth and electricity demand, making the recommendations in these documents to be flawed. Using monthly data from January 1990 to May 2017, together with Autoregressive Distributed Lag (ARDL) bounds testing for cointegration, this paper measures changes in the elasticity of electricity demand as a result of the massive price hikes over the past decade. Thereafter, the implications of changed electricity as well as possibly lower Gross Domestic Product (GDP) growth in the future for forecasts of possible future demand for electricity are examined. From these revised forecasts, it is possible to make appropriate recommendations in regards to electricity supply policy for South Africa including what possible energy mix is needed as well as the requirements for creating new supply to meet possible future demand. It is concluded that future electricity demand is likely to be much lower than forecast in the IRP 2010 and IRP 2013 documents. The degree of uncertainty in electricity demand growth suggests that large-scale increases in supply capacity taking years to construct, such as coal or nuclear, should be avoided. Small, incremental increases in supply that are able to come on stream swiftly, such as gas, solar and wind power, are likely to be more appropriate for meeting South Africa’s future needs.
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The fourth industrial revolution and human capital development
- Authors: Goldschmidt, Kyle
- Date: 2018
- Subjects: Technological innovations -- Economic aspects , Human capital , Intellectual capital , Economic development , Economic development -- Effect of education on , Fourth industrial revolution
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/62483 , vital:28197
- Description: The focus of the Fourth Industrial Revolution has been on its implications on Human Capital and its need to develop “21st-Century Skills" through education to ensure future labour and capital complementarity. Human Capital combined with 21st-Century Skills, it is claimed, can together generate economic growth, jobs and propel an economy into the next Industrial Revolution. However, Schwab’s (2016) concept of the Fourth Industrial Revolution, make no distinction between the Average Worker and the Knowledge Elite and their relationship to each other and successful economic growth. The different nature of these skills is absent in the literature to date. A critical analysis of literature will be used to examine Schwab’s (2016) claim of a Fourth Industrial Revolution and assess how the Average Worker and the Knowledge Elite relate to the Fourth Industrial Revolution and 21st-Century Skills. The evidence is provided on how both the Average Worker and the Knowledge Elite are key contributors to economic growth and will be important in the Fourth Industrial Revolution.
- Full Text:
- Authors: Goldschmidt, Kyle
- Date: 2018
- Subjects: Technological innovations -- Economic aspects , Human capital , Intellectual capital , Economic development , Economic development -- Effect of education on , Fourth industrial revolution
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/62483 , vital:28197
- Description: The focus of the Fourth Industrial Revolution has been on its implications on Human Capital and its need to develop “21st-Century Skills" through education to ensure future labour and capital complementarity. Human Capital combined with 21st-Century Skills, it is claimed, can together generate economic growth, jobs and propel an economy into the next Industrial Revolution. However, Schwab’s (2016) concept of the Fourth Industrial Revolution, make no distinction between the Average Worker and the Knowledge Elite and their relationship to each other and successful economic growth. The different nature of these skills is absent in the literature to date. A critical analysis of literature will be used to examine Schwab’s (2016) claim of a Fourth Industrial Revolution and assess how the Average Worker and the Knowledge Elite relate to the Fourth Industrial Revolution and 21st-Century Skills. The evidence is provided on how both the Average Worker and the Knowledge Elite are key contributors to economic growth and will be important in the Fourth Industrial Revolution.
- Full Text:
An analysis of the impact of financialization on commodity markets
- Authors: Ndawona, Takudzwa Maitaishe
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/7113 , vital:21218
- Description: An unprecedented increase in real commodity prices from 2002-2011 fuelled an intense debate as to the causes of the steep rise in prices and its possible implications for producers and consumers. On the one hand, the prolonged and dramatic rise in almost all commodity prices is attributed to growing demand from emerging market economies, supply shocks such as adverse weather conditions, export bans as well as other macroeconomic factors. Collectively these are known as the fundamental (demand and supply) factors. On the other hand, there is a growing body of evidence that suggests these fundamental factors alone are not sufficient enough to explain recent commodity price developments. It is noted that alongside changes in the fundamental factors, there was a major shift in trading activities on commodity derivative markets related to the increasing presence of financial investors, institutional investors and hedge funds. This had important effects, it is argued, on the microstructure of these markets and on price dynamics in a process termed “fmancialization”. Most of the empirical literature covers the period of rising commodity prices from 20022011. This study seeks to add to the existing literature by examining, in addition, the impact of financialization when commodity prices were falling from 2011-2015. Whereas the literature focuses mainly on the rise of agricultural commodity prices, the focus of this study is on metals, oil and bulk commodities (coal and iron ore). Two techniques are employed, namely the calculation of rolling correlations for futures and spot returns. Granger causality tests are then performed to examine the relationships between futures and spot prices. Rolling return correlations are calculated for i) different exchange- traded commodities and ii) exchange-traded commodities and bulk commodities not traded on exchanges. This is done to establish whether the increased correlations between different commodities found in the literature still hold now that commodity prices across all categories are falling. Granger causality tests are used in order to establish the link between the futures prices and spot prices both during the upswing period (2002-2011) and downswing period (2011-2015). It is found that rapidly growing indexed-based investment in commodity markets (financialization) during the upswing period is concurrent with increasingly correlated returns on the prices of unrelated commodities in both the futures and spot markets. These correlations decline during the period of falling commodity prices (2011-2015). This was a period in which the total amount of commodity assets under management fell sharply. This supports the a priori expectation that if the increased correlations of previously seemingly correlated and unrelated commodities during the upswing had been driven by financialization, the correlation would decline in the downturn. Granger causality results reveal statistically significant evidence of futures prices (returns) driving spot prices (returns) during the financialization period. However, post-financialization there is a shift to more bidirectional relationships. The study therefore concludes that, in addition to changing fundamental and macroeconomic factors, the financialization of commodity markets further drove the excessive and volatile price levels in commodity markets from 2002 to 2011.
- Full Text:
- Authors: Ndawona, Takudzwa Maitaishe
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/7113 , vital:21218
- Description: An unprecedented increase in real commodity prices from 2002-2011 fuelled an intense debate as to the causes of the steep rise in prices and its possible implications for producers and consumers. On the one hand, the prolonged and dramatic rise in almost all commodity prices is attributed to growing demand from emerging market economies, supply shocks such as adverse weather conditions, export bans as well as other macroeconomic factors. Collectively these are known as the fundamental (demand and supply) factors. On the other hand, there is a growing body of evidence that suggests these fundamental factors alone are not sufficient enough to explain recent commodity price developments. It is noted that alongside changes in the fundamental factors, there was a major shift in trading activities on commodity derivative markets related to the increasing presence of financial investors, institutional investors and hedge funds. This had important effects, it is argued, on the microstructure of these markets and on price dynamics in a process termed “fmancialization”. Most of the empirical literature covers the period of rising commodity prices from 20022011. This study seeks to add to the existing literature by examining, in addition, the impact of financialization when commodity prices were falling from 2011-2015. Whereas the literature focuses mainly on the rise of agricultural commodity prices, the focus of this study is on metals, oil and bulk commodities (coal and iron ore). Two techniques are employed, namely the calculation of rolling correlations for futures and spot returns. Granger causality tests are then performed to examine the relationships between futures and spot prices. Rolling return correlations are calculated for i) different exchange- traded commodities and ii) exchange-traded commodities and bulk commodities not traded on exchanges. This is done to establish whether the increased correlations between different commodities found in the literature still hold now that commodity prices across all categories are falling. Granger causality tests are used in order to establish the link between the futures prices and spot prices both during the upswing period (2002-2011) and downswing period (2011-2015). It is found that rapidly growing indexed-based investment in commodity markets (financialization) during the upswing period is concurrent with increasingly correlated returns on the prices of unrelated commodities in both the futures and spot markets. These correlations decline during the period of falling commodity prices (2011-2015). This was a period in which the total amount of commodity assets under management fell sharply. This supports the a priori expectation that if the increased correlations of previously seemingly correlated and unrelated commodities during the upswing had been driven by financialization, the correlation would decline in the downturn. Granger causality results reveal statistically significant evidence of futures prices (returns) driving spot prices (returns) during the financialization period. However, post-financialization there is a shift to more bidirectional relationships. The study therefore concludes that, in addition to changing fundamental and macroeconomic factors, the financialization of commodity markets further drove the excessive and volatile price levels in commodity markets from 2002 to 2011.
- Full Text:
The impact of good news and bad news on South Africa’s sectoral stock return volatility: an asymmetric GARCH analysis
- Authors: Muzinda, Edmond Toreva
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/6425 , vital:21108
- Description: This study explores the impact of good news and bad news on South Africa’s sectoral stock return volatility using an asymmetric GARCH analysis. Understanding the different impact of news on stock return volatility in different economic sectors has important implications for investors’ risk management practices, portfolio allocation strategies and asset pricing. The study employs data of daily closing prices for nine sectors and three benchmark indices for the period 2nd January 1997 - 17th August 2016. The data was split into sub-samples of pre-, during and post-global financial crisis, as well as the overall sample period. The incorporation of sub-samples was to help explain the outcomes of the overall sample period. To capture the different impact of good news and bad news on stock return volatility for each sector, asymmetric GARCH models namely, TGARCH and EGARCH were employed. The findings from this study revealed that volatility asymmetry was present in all sectors and benchmark indices of South African equity market. Bad news had more impact on stock return volatility for all sectors except the Oil and Gas sector, than good news of the same magnitude. In the Oil and Gas sector, good news was found to have an amplified effect on return volatility compared with bad news of the same magnitude. High volatility persistence was also found to be present in the Consumer goods, Financials, Industrials, All-share index and Mid-cap index. High differential impact of good and bad news were found in the Industrials, Financials, Basic materials, Consumer goods and the All-share index. Since the main objective of this study was to provide explanations of volatility asymmetry found in the South African sectors, the following were proposed as possible explanations of the findings. Within sectors, volatility asymmetry was explained by financial leverage, the role of the media, loss-averse investors and the behaviour of traders (overconfidence and extrapolation bias). Volatility asymmetry across sectors was explained by information flow, the uneven distribution of information by the media, investor sentiments, investor expectations and trading volumes. Overall, the results indicate that the stock return volatility of individual sectors of the South African equity market is driven mainly by bad news (except for Oil and Gas) and that leverage effects exist in all the sectors and in the benchmark indices.
- Full Text:
- Authors: Muzinda, Edmond Toreva
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/6425 , vital:21108
- Description: This study explores the impact of good news and bad news on South Africa’s sectoral stock return volatility using an asymmetric GARCH analysis. Understanding the different impact of news on stock return volatility in different economic sectors has important implications for investors’ risk management practices, portfolio allocation strategies and asset pricing. The study employs data of daily closing prices for nine sectors and three benchmark indices for the period 2nd January 1997 - 17th August 2016. The data was split into sub-samples of pre-, during and post-global financial crisis, as well as the overall sample period. The incorporation of sub-samples was to help explain the outcomes of the overall sample period. To capture the different impact of good news and bad news on stock return volatility for each sector, asymmetric GARCH models namely, TGARCH and EGARCH were employed. The findings from this study revealed that volatility asymmetry was present in all sectors and benchmark indices of South African equity market. Bad news had more impact on stock return volatility for all sectors except the Oil and Gas sector, than good news of the same magnitude. In the Oil and Gas sector, good news was found to have an amplified effect on return volatility compared with bad news of the same magnitude. High volatility persistence was also found to be present in the Consumer goods, Financials, Industrials, All-share index and Mid-cap index. High differential impact of good and bad news were found in the Industrials, Financials, Basic materials, Consumer goods and the All-share index. Since the main objective of this study was to provide explanations of volatility asymmetry found in the South African sectors, the following were proposed as possible explanations of the findings. Within sectors, volatility asymmetry was explained by financial leverage, the role of the media, loss-averse investors and the behaviour of traders (overconfidence and extrapolation bias). Volatility asymmetry across sectors was explained by information flow, the uneven distribution of information by the media, investor sentiments, investor expectations and trading volumes. Overall, the results indicate that the stock return volatility of individual sectors of the South African equity market is driven mainly by bad news (except for Oil and Gas) and that leverage effects exist in all the sectors and in the benchmark indices.
- Full Text:
Inequality in South Africa: a possible solution within the labour market
- Authors: Ferreira, John-Edward
- Date: 2016
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/4047 , vital:20594
- Description: This study sets out to identify the most effective way in which persistently and unacceptably high levels of inequality can be reduced in South Africa. Three alternative approaches were identified from the literature and their impact explored statistically. They are: the introduction of a ‘Social Solidarity Grant’; a decrease in unemployment by 5%; and a narrowing of the skill premium through an expansion of tertiary education. It is important to note that the study makes no attempt at explaining how these outcomes might be implemented or achieved. Rather, it sets out to determine only the effect that such policies may have on measured inequality. It was found that while the introduction of a new grant had a significant effect on inequality, this effect however, was once-off. The grant would be financed by individuals in the top decile through tax increases, which would be a complicated endeavour. Both job creation and a narrowing of the skills premium were significantly effective in decreasing inequality. The narrowing of the skills premium showed more promise due to its accelerating effectiveness in decreasing inequality over time and the fact that it directly addresses the problem of wage differentials. It was noted that the extreme levels of poverty and unemployment in South Africa may dampen enthusiasm for policies that narrow the skills premium to reduce inequality. These characteristics make job creation a more popular policy option because of the positive impact on poverty and unemployment as well as on inequality.
- Full Text:
- Authors: Ferreira, John-Edward
- Date: 2016
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/4047 , vital:20594
- Description: This study sets out to identify the most effective way in which persistently and unacceptably high levels of inequality can be reduced in South Africa. Three alternative approaches were identified from the literature and their impact explored statistically. They are: the introduction of a ‘Social Solidarity Grant’; a decrease in unemployment by 5%; and a narrowing of the skill premium through an expansion of tertiary education. It is important to note that the study makes no attempt at explaining how these outcomes might be implemented or achieved. Rather, it sets out to determine only the effect that such policies may have on measured inequality. It was found that while the introduction of a new grant had a significant effect on inequality, this effect however, was once-off. The grant would be financed by individuals in the top decile through tax increases, which would be a complicated endeavour. Both job creation and a narrowing of the skills premium were significantly effective in decreasing inequality. The narrowing of the skills premium showed more promise due to its accelerating effectiveness in decreasing inequality over time and the fact that it directly addresses the problem of wage differentials. It was noted that the extreme levels of poverty and unemployment in South Africa may dampen enthusiasm for policies that narrow the skills premium to reduce inequality. These characteristics make job creation a more popular policy option because of the positive impact on poverty and unemployment as well as on inequality.
- Full Text:
An analysis of public equity offerings listed on the Johannesburg Stock Exchange (JSE)
- Authors: Van Heerden, Gillian
- Date: 2015
- Subjects: Stock exchanges -- South Africa -- Johannesburg
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1119 , http://hdl.handle.net/10962/d1017546
- Description: The underpricing of initial public offerings (IPOs) and their subsequent low long-run performance represents one of the anomalies observed in primary markets worldwide. However, the depth and breadth of it varies from country to country, and sector to sector. Literature has documented that the phenomenon surrounding the long-run post issue performance of IPOs is not unique and that quite similar patterns can be found regarding firms making seasoned equity offerings (SEOs). This study is an empirical analysis of public equity offerings listed on the Johannesburg Stock Exchange (JSE). Using data for 141 South African IPOs that were listed on the JSE Mainboard from 2001 to 2010, significant short-run underpricing is found. A sector wise analysis of three broad sectors indicated that the ‘other’ sector had the largest IPO underpricing after the first few days of trading. The year-wise analysis is also documented. In the long-run this study showed that IPOs in South Africa underperformed two out of three benchmarks in 36 full months post listing. In contrast, using data for 50 South African SEOs during 2003 to 2010, superior SEO performance is found over a 36-month period when assessed using a size and industry adjusted benchmark. Various cross-sectional and time-series patterns in the aftermarket performance of IPO and SEO firms are also documented
- Full Text:
- Authors: Van Heerden, Gillian
- Date: 2015
- Subjects: Stock exchanges -- South Africa -- Johannesburg
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1119 , http://hdl.handle.net/10962/d1017546
- Description: The underpricing of initial public offerings (IPOs) and their subsequent low long-run performance represents one of the anomalies observed in primary markets worldwide. However, the depth and breadth of it varies from country to country, and sector to sector. Literature has documented that the phenomenon surrounding the long-run post issue performance of IPOs is not unique and that quite similar patterns can be found regarding firms making seasoned equity offerings (SEOs). This study is an empirical analysis of public equity offerings listed on the Johannesburg Stock Exchange (JSE). Using data for 141 South African IPOs that were listed on the JSE Mainboard from 2001 to 2010, significant short-run underpricing is found. A sector wise analysis of three broad sectors indicated that the ‘other’ sector had the largest IPO underpricing after the first few days of trading. The year-wise analysis is also documented. In the long-run this study showed that IPOs in South Africa underperformed two out of three benchmarks in 36 full months post listing. In contrast, using data for 50 South African SEOs during 2003 to 2010, superior SEO performance is found over a 36-month period when assessed using a size and industry adjusted benchmark. Various cross-sectional and time-series patterns in the aftermarket performance of IPO and SEO firms are also documented
- Full Text:
Impact of the global financial crisis on economic growth: implications for South Africa and other developing economies
- Authors: Savy, Neil Edward
- Date: 2015
- Subjects: Global Financial Crisis, 2008-2009 , Gross domestic product -- Developing countries , Gross domestic product -- South Africa , Economic forecasting -- South Africa , Economic forecasting -- Developing countries , Economic development -- South Africa , Economic development -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1117 , http://hdl.handle.net/10962/d1017542
- Description: This paper examines the impact of the recent global financial crisis on economic growth in developing economies and South Africa in particular. It explores whether the events experienced by developing countries conform to what would be anticipated from economic theory. This is done by firstly comparing country growth forecasts for 2012 captured in 2008 at the beginning of the crisis to actual 2012 GDP growth data. Secondly, panel data analysis is used to investigate three important transmission channels, namely those of Trade, Capital Flows and Exchange Rates for 25 developing economies. The results suggest that economic forecasters in 2008 on average overestimated GDP growth for 2012 by -21.6 percent (excluding Venezuela). The only important transmission channel identified using Trend analysis to explain this negative impact on growth was capital flows. However when using Panel regression analysis all three channels were found to explain the economic impact of the crisis on GDP growth for developing countries, conforming to economic theory. It was discovered that, contrary to what was initially expected, portfolio inflows actually increased for most developing countries during the crisis. This possibly can be explained by the impact of quantitative easing in the USA. South Africa was found to have been negatively impacted by the global financial crisis, but to a lesser extent when compared to most other developing countries. The findings are important for global investors looking for new investment opportunities. The extent to which individual economies are “decoupled” from developed economies’ performance provides possible opportunities for diversifying risk through a geographic spread of investor portfolios.
- Full Text:
- Authors: Savy, Neil Edward
- Date: 2015
- Subjects: Global Financial Crisis, 2008-2009 , Gross domestic product -- Developing countries , Gross domestic product -- South Africa , Economic forecasting -- South Africa , Economic forecasting -- Developing countries , Economic development -- South Africa , Economic development -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1117 , http://hdl.handle.net/10962/d1017542
- Description: This paper examines the impact of the recent global financial crisis on economic growth in developing economies and South Africa in particular. It explores whether the events experienced by developing countries conform to what would be anticipated from economic theory. This is done by firstly comparing country growth forecasts for 2012 captured in 2008 at the beginning of the crisis to actual 2012 GDP growth data. Secondly, panel data analysis is used to investigate three important transmission channels, namely those of Trade, Capital Flows and Exchange Rates for 25 developing economies. The results suggest that economic forecasters in 2008 on average overestimated GDP growth for 2012 by -21.6 percent (excluding Venezuela). The only important transmission channel identified using Trend analysis to explain this negative impact on growth was capital flows. However when using Panel regression analysis all three channels were found to explain the economic impact of the crisis on GDP growth for developing countries, conforming to economic theory. It was discovered that, contrary to what was initially expected, portfolio inflows actually increased for most developing countries during the crisis. This possibly can be explained by the impact of quantitative easing in the USA. South Africa was found to have been negatively impacted by the global financial crisis, but to a lesser extent when compared to most other developing countries. The findings are important for global investors looking for new investment opportunities. The extent to which individual economies are “decoupled” from developed economies’ performance provides possible opportunities for diversifying risk through a geographic spread of investor portfolios.
- Full Text:
Reviewing the definition of the natural resource curse and analysing its occurence post-1990
- Authors: Mwansa, Mumamba Chitumwa
- Date: 2014
- Subjects: Resource curse , Natural resources -- Management , Economic development , National income
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1100 , http://hdl.handle.net/10962/d1013243
- Description: That countries with high natural resource abundance should experience slower economic growth than those with low resource abundance seems contrary to what would be expected, considering the developmental head-start such resources afford. Yet Sachs and Warner (1997) found that economies with a high share of natural resource exports in national income in 1970 tended to experience slower economic growth in the two decades that followed. This finding, that natural resources are a “curse” rather than a blessing, has become generally accepted. This thesis sought to test whether the conclusion drawn from their data – that higher natural resource abundance leads to slower economic growth – is still correct. It sought to test their findings first by correcting for their use of resource intensity (natural resources share of exports) as a proxy for abundance. Using measures of resource abundance for 1995 as a proxy for abundance in previous decades, it was found that higher resource abundance was not associated with lower economic growth in the 1970s and 1980s. This finding is contrary to that of Sachs and Warner (1997, 2001). Secondly, this thesis tested whether the natural resource curse effect was still present for the period 1995–2010. This was done by observing the effect of both resource abundance and resource intensity on economic growth during 1995–2010. In both cases no resource curse effect was found, for this more recent period. The resource curse had disappeared regardless of whether one uses Sachs and Warner’s (1997, 2001) measure of resource intensity or a measure of resource abundance. Natural resources should therefore no longer be considered a “curse”. In explaining the difference for the impact of resource intensity between the 1970-90 period measured by Sachs and Warner (1997, 2001) and the more recent period 1995-2010 it was found that the Dutch Disease effect has decreased significantly since the 1970s and 1980s. This could partly explain why the resource curse has disappeared when measured in terms of resource intensity. Thus it was concluded that the natural resource curse existed in the period 1970-90 only when measured in terms of resource intensity but not when measured relative to resource abundance. The negative effects of natural resources on economic growth have disappeared in terms of both resource intensity and resource abundance in the more recent time period.
- Full Text:
- Authors: Mwansa, Mumamba Chitumwa
- Date: 2014
- Subjects: Resource curse , Natural resources -- Management , Economic development , National income
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1100 , http://hdl.handle.net/10962/d1013243
- Description: That countries with high natural resource abundance should experience slower economic growth than those with low resource abundance seems contrary to what would be expected, considering the developmental head-start such resources afford. Yet Sachs and Warner (1997) found that economies with a high share of natural resource exports in national income in 1970 tended to experience slower economic growth in the two decades that followed. This finding, that natural resources are a “curse” rather than a blessing, has become generally accepted. This thesis sought to test whether the conclusion drawn from their data – that higher natural resource abundance leads to slower economic growth – is still correct. It sought to test their findings first by correcting for their use of resource intensity (natural resources share of exports) as a proxy for abundance. Using measures of resource abundance for 1995 as a proxy for abundance in previous decades, it was found that higher resource abundance was not associated with lower economic growth in the 1970s and 1980s. This finding is contrary to that of Sachs and Warner (1997, 2001). Secondly, this thesis tested whether the natural resource curse effect was still present for the period 1995–2010. This was done by observing the effect of both resource abundance and resource intensity on economic growth during 1995–2010. In both cases no resource curse effect was found, for this more recent period. The resource curse had disappeared regardless of whether one uses Sachs and Warner’s (1997, 2001) measure of resource intensity or a measure of resource abundance. Natural resources should therefore no longer be considered a “curse”. In explaining the difference for the impact of resource intensity between the 1970-90 period measured by Sachs and Warner (1997, 2001) and the more recent period 1995-2010 it was found that the Dutch Disease effect has decreased significantly since the 1970s and 1980s. This could partly explain why the resource curse has disappeared when measured in terms of resource intensity. Thus it was concluded that the natural resource curse existed in the period 1970-90 only when measured in terms of resource intensity but not when measured relative to resource abundance. The negative effects of natural resources on economic growth have disappeared in terms of both resource intensity and resource abundance in the more recent time period.
- Full Text:
Saving and investment in South Africa: a causality study
- Authors: Mngqibisa, Vuyisa
- Date: 2014
- Subjects: Saving and investment -- South Africa Investments -- South Africa Credit -- South Africa Finance, Personal -- South Africa Portfolio management -- South Africa Investment analysis -- South Africa Error analysis (Mathematics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1086 , http://hdl.handle.net/10962/d1011887
- Description: This study aims to investigate the relationship between private saving and investment for South Africa using a Vector Error Correction Framework. Saving and investment are considered to be important factors for sustainable economic growth in the country, particularly as these variables have been recorded at significantly lower levels than those of other developing nations. By examining the direction of causality between saving and investment, the most suitable policy measures can be used in stimulating either savings or investment, and as a result aggregate growth. The study found a positive two-way causality to exist between these two variables, proving that both saving and investment-led policies are necessary in raising saving and investment levels. With the inclusion of credit extension as the third variable used to remove any variable bias, the study not only found credit extension to Granger cause private saving, but the reverse relationship was found to be present as well. This relationship was however found to be negative, confirming that lower borrowing constraints may have a negative effect on saving levels. The negative relationship between credit supply and private saving (substitution effect) proves that credit supply will only yield a positive result for savings if channelled through investment expenditure.
- Full Text:
- Authors: Mngqibisa, Vuyisa
- Date: 2014
- Subjects: Saving and investment -- South Africa Investments -- South Africa Credit -- South Africa Finance, Personal -- South Africa Portfolio management -- South Africa Investment analysis -- South Africa Error analysis (Mathematics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1086 , http://hdl.handle.net/10962/d1011887
- Description: This study aims to investigate the relationship between private saving and investment for South Africa using a Vector Error Correction Framework. Saving and investment are considered to be important factors for sustainable economic growth in the country, particularly as these variables have been recorded at significantly lower levels than those of other developing nations. By examining the direction of causality between saving and investment, the most suitable policy measures can be used in stimulating either savings or investment, and as a result aggregate growth. The study found a positive two-way causality to exist between these two variables, proving that both saving and investment-led policies are necessary in raising saving and investment levels. With the inclusion of credit extension as the third variable used to remove any variable bias, the study not only found credit extension to Granger cause private saving, but the reverse relationship was found to be present as well. This relationship was however found to be negative, confirming that lower borrowing constraints may have a negative effect on saving levels. The negative relationship between credit supply and private saving (substitution effect) proves that credit supply will only yield a positive result for savings if channelled through investment expenditure.
- Full Text:
Why has South Africa been relatively unsuccessful at attracting inward foreign direct investment since 1994?
- Authors: Fulton, Mark Hugh John
- Date: 2014
- Subjects: Investments, Foreign -- South Africa , Investments, Foreign -- Africa, Southern , Investments, Foreign -- Chile , Investments, Foreign -- Botswana , Economic development -- South Africa , Economic development -- Developing countries , Political corruption -- Economic aspects -- South Africa , South Africa -- Economic policy -- 1994-
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1097 , http://hdl.handle.net/10962/d1013056
- Description: Foreign Direct Investment (FDI) flows into South Africa have been very low for several decades, and this research examines the reason(s) why this has been the case since 1994. There is a common belief amongst economists that there is a positive relationship between the amount of FDI received and economic growth, thus the desire to attract greater FDI inflows. A literature review was conducted to establish the determinants of FDI globally and then data were collected and assessed to test which causes are most important. The performance of developing nations in attracting FDI was first compared with that of the developed nations. Thereafter, a regional breakdown of FDI flows was presented, with a particular focus on the Southern African region. FDI inflows to South Africa since 1994 were compared against the identified determinants of FDI, as well as with FDI inflows into two other major mining economies, Chile and Botswana. The friendliness of the government towards business was identified as a significant determinant of FDI inflows and the importance of this factor in explaining FDI inflows into environment in South Africa was looked at in more depth. It was found that many investors perceive the South African government as hostile towards business and as corrupt and/or inefficient. The empirical results show that this negative perception helps explain the FDI inflows attracted by South Africa since 1994. Therefore, increased friendliness to business by the government should increase future inward FDI flows into South Africa.
- Full Text:
- Authors: Fulton, Mark Hugh John
- Date: 2014
- Subjects: Investments, Foreign -- South Africa , Investments, Foreign -- Africa, Southern , Investments, Foreign -- Chile , Investments, Foreign -- Botswana , Economic development -- South Africa , Economic development -- Developing countries , Political corruption -- Economic aspects -- South Africa , South Africa -- Economic policy -- 1994-
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1097 , http://hdl.handle.net/10962/d1013056
- Description: Foreign Direct Investment (FDI) flows into South Africa have been very low for several decades, and this research examines the reason(s) why this has been the case since 1994. There is a common belief amongst economists that there is a positive relationship between the amount of FDI received and economic growth, thus the desire to attract greater FDI inflows. A literature review was conducted to establish the determinants of FDI globally and then data were collected and assessed to test which causes are most important. The performance of developing nations in attracting FDI was first compared with that of the developed nations. Thereafter, a regional breakdown of FDI flows was presented, with a particular focus on the Southern African region. FDI inflows to South Africa since 1994 were compared against the identified determinants of FDI, as well as with FDI inflows into two other major mining economies, Chile and Botswana. The friendliness of the government towards business was identified as a significant determinant of FDI inflows and the importance of this factor in explaining FDI inflows into environment in South Africa was looked at in more depth. It was found that many investors perceive the South African government as hostile towards business and as corrupt and/or inefficient. The empirical results show that this negative perception helps explain the FDI inflows attracted by South Africa since 1994. Therefore, increased friendliness to business by the government should increase future inward FDI flows into South Africa.
- Full Text:
An analysis of the determinants and recent decline of private savings in South Africa
- Authors: Linde, Kathryn Leigh
- Date: 2012
- Subjects: Saving and investment -- Research -- South Africa Finance, Personal -- Research -- South Africa Corporations -- Finance -- Research -- South Africa Economic development -- Research -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1007 , http://hdl.handle.net/10962/d1002742
- Description: Low domestic saving rates make South Africa highly dependent on foreign capital inflows to fund higher investment levels. These inflows are highly volatile and may prove to be unsustainable in the long-run. This study analyses the determinants of private saving in South Africa, with specific reference to the decline in private saving rates that occurred at a time of higher economic growth prior to the 2008 global financial crisis. The Johansen cointegration method is used to estimate separate vector error correction models (VECM) in order to assess the effect of specific variables on both corporate and household saving. The results obtained that are common to both corporate and household savmg show that the govemment budget balance negatively impacts private saving rates though the offset is less than one. The real prime overdraft rate positively impacts private saving, although the result is small . The impact of real Gross Domestic Product (GDP) is positive. In recent years, however, private saving rates fell alongside higher economic growth, which may reflect a structural change in corporate saving behaviour. The results distinct to the corporate saving model show that commodity prices have a negative impact on corporate saving. This does not conform to a priori expectations, but is supported by the behaviour of these two variables in recent years. Foreign savings were found to impact negatively on corporate saving. This result is important, since the dependence of the South African economy on foreign capital inflows to fund higher investment levels is reflected by high current account deficits during recent periods of economic growth. Evidence of financial liberalization negatively impacting on private saving in South Africa due to the removal of borrowing constraints was found. A negative relationship was found between corporate saving and investment demonstrating that corporations have reduced levels of retained eamings for funding investment expenditures. The results distinct to the household saving model provide evidence of a negative wealth effect in South Africa, with rising housing wealth found to increase consumption. Evidence of households "piercing the corporate veil" in South Africa was found. Therefore, households view corporate saving behaviour as essentially being conducted on their behalf. This finding and the finding that the offset between the budget deficit and private saving is less than one suggest that counter-cyclical fiscal policy will be an important policy response for achieving higher domestic saving rates in South Africa.
- Full Text:
- Authors: Linde, Kathryn Leigh
- Date: 2012
- Subjects: Saving and investment -- Research -- South Africa Finance, Personal -- Research -- South Africa Corporations -- Finance -- Research -- South Africa Economic development -- Research -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1007 , http://hdl.handle.net/10962/d1002742
- Description: Low domestic saving rates make South Africa highly dependent on foreign capital inflows to fund higher investment levels. These inflows are highly volatile and may prove to be unsustainable in the long-run. This study analyses the determinants of private saving in South Africa, with specific reference to the decline in private saving rates that occurred at a time of higher economic growth prior to the 2008 global financial crisis. The Johansen cointegration method is used to estimate separate vector error correction models (VECM) in order to assess the effect of specific variables on both corporate and household saving. The results obtained that are common to both corporate and household savmg show that the govemment budget balance negatively impacts private saving rates though the offset is less than one. The real prime overdraft rate positively impacts private saving, although the result is small . The impact of real Gross Domestic Product (GDP) is positive. In recent years, however, private saving rates fell alongside higher economic growth, which may reflect a structural change in corporate saving behaviour. The results distinct to the corporate saving model show that commodity prices have a negative impact on corporate saving. This does not conform to a priori expectations, but is supported by the behaviour of these two variables in recent years. Foreign savings were found to impact negatively on corporate saving. This result is important, since the dependence of the South African economy on foreign capital inflows to fund higher investment levels is reflected by high current account deficits during recent periods of economic growth. Evidence of financial liberalization negatively impacting on private saving in South Africa due to the removal of borrowing constraints was found. A negative relationship was found between corporate saving and investment demonstrating that corporations have reduced levels of retained eamings for funding investment expenditures. The results distinct to the household saving model provide evidence of a negative wealth effect in South Africa, with rising housing wealth found to increase consumption. Evidence of households "piercing the corporate veil" in South Africa was found. Therefore, households view corporate saving behaviour as essentially being conducted on their behalf. This finding and the finding that the offset between the budget deficit and private saving is less than one suggest that counter-cyclical fiscal policy will be an important policy response for achieving higher domestic saving rates in South Africa.
- Full Text:
An analysis of the influence of domestic macroeconomic variables on the performance of the South African stock market sectoral indices
- Authors: Hancocks, Ryan Lee
- Date: 2011
- Subjects: Johannesburg Stock Exchange , Stock price indexes -- South Africa , Interest rates -- South Africa , Macroeconomics -- Econometric models
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: vital:954
- Description: An econometric study was undertaken to determine the extent to which selected macroeconomic variables influenced stock market prices on the All-Share, Financial, Mining and Retail Indices of the Johannesburg Stock Exchange in South Africa from 1996:7 to 2008:12. The Johansen cointegration method was used to determine whether cointegrating relationships existed between the macroeconomic variables and the stock market indices. A Vector Error Correction model was estimated and found significant results that money supply, inflation, long and short- run interest rates, and the exchange rate all had an influence on stock market prices. Further, the VECM results for each sector indicated that certain macroeconomic variables had differing influences on each sector of the stock market. Impulse Response tests indicated that the selected macroeconomic variables caused shock to the sectoral indices in the short-run but that the effect was lagged. The Variance Decomposition tests conducted supported earlier evidence that the macroeconomic variables had a strong level of sectoral index determinacy in the long run. The results found that the All-Share and Financial Indices were negatively influenced by inflation and short term interest rates in the long run, while the Financial Index also had a negative relationship with long-run interest rates. Money supply was found to have a positive effect on all the indices. A weakening of the exchange rate was found to have a positive influence on both the Retail and Mining Indices, while it negatively affected the All-Share and Financial Indices. The long-run interest rate had a positive influence on both the Retail and Mining Indices. Overall the study finds that macroeconomic variables are important determinants of stock market prices in South Africa and that it is important to examine each sector of the stock market separately to capture what are different effects. The limitations of the study are that a different measure for exchange rates from the nominal rand/dollar exchange rate used here may yield more decisive results and provide insight into the link between exchange rate behaviour and performance of especially the retail sector.
- Full Text:
- Authors: Hancocks, Ryan Lee
- Date: 2011
- Subjects: Johannesburg Stock Exchange , Stock price indexes -- South Africa , Interest rates -- South Africa , Macroeconomics -- Econometric models
- Language: English
- Type: text , Thesis , Masters , MCom
- Identifier: vital:954
- Description: An econometric study was undertaken to determine the extent to which selected macroeconomic variables influenced stock market prices on the All-Share, Financial, Mining and Retail Indices of the Johannesburg Stock Exchange in South Africa from 1996:7 to 2008:12. The Johansen cointegration method was used to determine whether cointegrating relationships existed between the macroeconomic variables and the stock market indices. A Vector Error Correction model was estimated and found significant results that money supply, inflation, long and short- run interest rates, and the exchange rate all had an influence on stock market prices. Further, the VECM results for each sector indicated that certain macroeconomic variables had differing influences on each sector of the stock market. Impulse Response tests indicated that the selected macroeconomic variables caused shock to the sectoral indices in the short-run but that the effect was lagged. The Variance Decomposition tests conducted supported earlier evidence that the macroeconomic variables had a strong level of sectoral index determinacy in the long run. The results found that the All-Share and Financial Indices were negatively influenced by inflation and short term interest rates in the long run, while the Financial Index also had a negative relationship with long-run interest rates. Money supply was found to have a positive effect on all the indices. A weakening of the exchange rate was found to have a positive influence on both the Retail and Mining Indices, while it negatively affected the All-Share and Financial Indices. The long-run interest rate had a positive influence on both the Retail and Mining Indices. Overall the study finds that macroeconomic variables are important determinants of stock market prices in South Africa and that it is important to examine each sector of the stock market separately to capture what are different effects. The limitations of the study are that a different measure for exchange rates from the nominal rand/dollar exchange rate used here may yield more decisive results and provide insight into the link between exchange rate behaviour and performance of especially the retail sector.
- Full Text:
Exchange rate behavior in the cases of the Zambian Kwacha and Malawian Kwacha : is there misalignment?
- Magwizi, Brenda Thandekha, Rhodes University
- Authors: Magwizi, Brenda Thandekha , Rhodes University
- Date: 2011
- Subjects: Foreign exchange rates -- Zambia Foreign exchange rates -- Malawi International relations -- Case studies -- Zambia International relations -- Case studies -- Malawi
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:974 , http://hdl.handle.net/10962/d1002708
- Description: The exchange rate is the price of one currency against another currency or currencies of a group of countries. Real exchange rates are important because they show the external competitiveness of a country‟s economy. Thus, when the exchange rate of a country is misaligned, this will affect its trade, production and the welfare of people. This study analysed macroeconomic determinants of the real exchange rate and dynamic adjustment of the real exchange rate as a result of shocks to these determinants. The study also determined the extent of misalignment of the real exchange rate in Malawi and Zambia and identified variables that contributed to it. Such information is important to policy makers. Quarterly data were used for both countries from 1980:1-2008:4. The literature review identified those variables that determine the exchange rate and these include government consumption, foreign aid, net foreign assets, commodity prices, terms of trade, domestic credit, openness and the Balassa Samuelson effect (technological progress). To determine the long-run relationship between the exchange rate and its determinants, we employed the Johansen approach and the Vector Error Correction Model (VECM). For robustness check on the long-run and shortrun effects of determinants on the exchange rate, variance decomposition and impulse response analyses were used. Results in the study show that in Malawi for both models, an increase in LAID, LGCON and LTOT resulted in real exchange rate depreciation and increases in LDC, NFA and LNEER resulted in an appreciation. In Zambia, increases in LAID, LGCON, LOPEN and LTOT caused the real exchange rate to depreciate while increases in LDC, NFA and LCOPPER led to an appreciation. Lagged LREER and LNEER were found to have short run effects on the equilibrium exchange rate for Malawi and lagged LCOPPER and LDC for Zambia. Periods of exchange rate misalignment were found in both countries. It was also found that the coefficient of speed of adjustment in Malawi in models 1 and 2 indicate that 11% and 27% of the variation in the real exchange rate from its equilibrium adjust each quarter respectively. The speed of adjustment for Zambia in both models was 45% and 47% respectively, higher than that of Malawi. Foreign aid has proven to be important in exchange rate misalignment in both countries, though this was not really expected in the case of Zambia. Given these results, it may be of interest to policy makers to understand which variables impact most on the exchange rate and how misalignment due to these determinants can be minimised.
- Full Text:
- Authors: Magwizi, Brenda Thandekha , Rhodes University
- Date: 2011
- Subjects: Foreign exchange rates -- Zambia Foreign exchange rates -- Malawi International relations -- Case studies -- Zambia International relations -- Case studies -- Malawi
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:974 , http://hdl.handle.net/10962/d1002708
- Description: The exchange rate is the price of one currency against another currency or currencies of a group of countries. Real exchange rates are important because they show the external competitiveness of a country‟s economy. Thus, when the exchange rate of a country is misaligned, this will affect its trade, production and the welfare of people. This study analysed macroeconomic determinants of the real exchange rate and dynamic adjustment of the real exchange rate as a result of shocks to these determinants. The study also determined the extent of misalignment of the real exchange rate in Malawi and Zambia and identified variables that contributed to it. Such information is important to policy makers. Quarterly data were used for both countries from 1980:1-2008:4. The literature review identified those variables that determine the exchange rate and these include government consumption, foreign aid, net foreign assets, commodity prices, terms of trade, domestic credit, openness and the Balassa Samuelson effect (technological progress). To determine the long-run relationship between the exchange rate and its determinants, we employed the Johansen approach and the Vector Error Correction Model (VECM). For robustness check on the long-run and shortrun effects of determinants on the exchange rate, variance decomposition and impulse response analyses were used. Results in the study show that in Malawi for both models, an increase in LAID, LGCON and LTOT resulted in real exchange rate depreciation and increases in LDC, NFA and LNEER resulted in an appreciation. In Zambia, increases in LAID, LGCON, LOPEN and LTOT caused the real exchange rate to depreciate while increases in LDC, NFA and LCOPPER led to an appreciation. Lagged LREER and LNEER were found to have short run effects on the equilibrium exchange rate for Malawi and lagged LCOPPER and LDC for Zambia. Periods of exchange rate misalignment were found in both countries. It was also found that the coefficient of speed of adjustment in Malawi in models 1 and 2 indicate that 11% and 27% of the variation in the real exchange rate from its equilibrium adjust each quarter respectively. The speed of adjustment for Zambia in both models was 45% and 47% respectively, higher than that of Malawi. Foreign aid has proven to be important in exchange rate misalignment in both countries, though this was not really expected in the case of Zambia. Given these results, it may be of interest to policy makers to understand which variables impact most on the exchange rate and how misalignment due to these determinants can be minimised.
- Full Text:
Exchange rates behaviour in Ghana and Nigeria: is there a misalignment?
- Authors: Mapenda, Rufaro
- Date: 2011 , 2011-11-09
- Subjects: Foreign exchange rates -- Ghana , Foreign exchange rates -- Nigeria , Economic development -- Ghana , Economic development -- Nigeria , Foreign exchange administration -- Ghana , Foreign exchange administration -- Nigeria , International relations
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:976 , http://hdl.handle.net/10962/d1002710 , Foreign exchange rates -- Ghana , Foreign exchange rates -- Nigeria , Economic development -- Ghana , Economic development -- Nigeria , Foreign exchange administration -- Ghana , Foreign exchange administration -- Nigeria , International relations
- Description: Exchange rates are believed to be one of the major driving forces behind sustainable macroeconomic growth and it is therefore important to ensure that they are at an appropriate level. Exchange rate misalignment is a situation where the actual exchange rate differs significantly from its equilibrium value, resulting in either an overvalued or an undervalued currency. The problem with an undervalued currency is that it will increase the domestic price of tradable goods whereas an overvalued currency will cause a fall in the domestic prices of the tradable goods. Persistent exchange rate misalignment is thus expected to result in severe macroeconomic instability. The aim of this study is to estimate the equilibrium real exchange rate for both Ghana and Nigeria. After so doing, the equilibrium real exchange rate is compared to the actual real exchange rate, in order to assess the extent of real exchange rate misalignment in both countries, if any such exists. In order test the applicability of the equilibrium exchange rate models, the study draws from the simple monetary model as well as the Edwards (1989) and Montiel (1999) models. These models postulate that the variables which determine the real exchange rate are the terms of trade, trade restrictions, domestic interest rates, foreign aid inflow, income, money supply, world inflation, government consumption expenditure, world interest rates, capital controls and technological progress. Due to data limitations in Ghana and in Nigeria, not all the variables are utilised in the study. The study uses the Johansen (1995) model as well as the Vector Error Correction Model (VECM) to estimate the long- and the short-run relationships between the above-mentioned determinants and the real exchange rate. Thereafter the study employs the Hodrick-Prescott filter to estimate the permanent equilibrium exchange rate. The study estimates a real exchange rate model each for Ghana and Nigeria. Both the exchange rate models for Ghana and Nigeria provide evidence of exchange rate misalignment. The model for Ghana shows that from the first quarter of 1980 to the last quarter of 1983 the real exchange rate was overvalued; thereafter the exchange rate moved close to its equilibrium value and was generally undervalued with few and short-lived episodes of overvaluation. In regard to real exchange rate misalignment in Nigeria prior to the Structural Adjustment Program in 1986 there were episodes of undervaluation from the first quarter of 1980 to the first quarter of 1984 and overvaluation from the second quarter of 1984 to the third quarter of 1986; thereafter the exchange rate was generally and marginally undervalued.
- Full Text:
- Authors: Mapenda, Rufaro
- Date: 2011 , 2011-11-09
- Subjects: Foreign exchange rates -- Ghana , Foreign exchange rates -- Nigeria , Economic development -- Ghana , Economic development -- Nigeria , Foreign exchange administration -- Ghana , Foreign exchange administration -- Nigeria , International relations
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:976 , http://hdl.handle.net/10962/d1002710 , Foreign exchange rates -- Ghana , Foreign exchange rates -- Nigeria , Economic development -- Ghana , Economic development -- Nigeria , Foreign exchange administration -- Ghana , Foreign exchange administration -- Nigeria , International relations
- Description: Exchange rates are believed to be one of the major driving forces behind sustainable macroeconomic growth and it is therefore important to ensure that they are at an appropriate level. Exchange rate misalignment is a situation where the actual exchange rate differs significantly from its equilibrium value, resulting in either an overvalued or an undervalued currency. The problem with an undervalued currency is that it will increase the domestic price of tradable goods whereas an overvalued currency will cause a fall in the domestic prices of the tradable goods. Persistent exchange rate misalignment is thus expected to result in severe macroeconomic instability. The aim of this study is to estimate the equilibrium real exchange rate for both Ghana and Nigeria. After so doing, the equilibrium real exchange rate is compared to the actual real exchange rate, in order to assess the extent of real exchange rate misalignment in both countries, if any such exists. In order test the applicability of the equilibrium exchange rate models, the study draws from the simple monetary model as well as the Edwards (1989) and Montiel (1999) models. These models postulate that the variables which determine the real exchange rate are the terms of trade, trade restrictions, domestic interest rates, foreign aid inflow, income, money supply, world inflation, government consumption expenditure, world interest rates, capital controls and technological progress. Due to data limitations in Ghana and in Nigeria, not all the variables are utilised in the study. The study uses the Johansen (1995) model as well as the Vector Error Correction Model (VECM) to estimate the long- and the short-run relationships between the above-mentioned determinants and the real exchange rate. Thereafter the study employs the Hodrick-Prescott filter to estimate the permanent equilibrium exchange rate. The study estimates a real exchange rate model each for Ghana and Nigeria. Both the exchange rate models for Ghana and Nigeria provide evidence of exchange rate misalignment. The model for Ghana shows that from the first quarter of 1980 to the last quarter of 1983 the real exchange rate was overvalued; thereafter the exchange rate moved close to its equilibrium value and was generally undervalued with few and short-lived episodes of overvaluation. In regard to real exchange rate misalignment in Nigeria prior to the Structural Adjustment Program in 1986 there were episodes of undervaluation from the first quarter of 1980 to the first quarter of 1984 and overvaluation from the second quarter of 1984 to the third quarter of 1986; thereafter the exchange rate was generally and marginally undervalued.
- Full Text:
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