The impact of financial inclusion and institutional quality on economic growth in the BRICS and MINT countries
- Authors: Matiso, Sibahle
- Date: 2021-04
- Subjects: BRIC countries , BRIC countries -- Foreign economic relations. , Economic development -- Developing countries
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51873 , vital:43380
- Description: The purpose of this study was to assess the relationship between Financial Inclusion, institutional quality, and economic growth in the Brics and Mint emerging economies. Taking six different indicators of financial availability, accessibility and usability, this paper constructed a single financial inclusion index using an approach developed by Sarma (2008). Similarly, taking six governance indicators and five economic freedom indicators we constructed a single Institutional quality index using the Principal Component Analysis (PCA) method. Thus, using data that spans from 2004 to 2018 we tested the relationship between these two indexes and Economic growth using the Pooled Mean Group (PMG) econometric model. The empirical results showed that there is indeed a positive and significant simultaneous effect of financial Inclusion and Institutional quality on Economic growth in the Brics and Mint emerging economies. This positive relationship between these variables suggests that government agents and policymakers in the Brics and Mint countries need to come up with strategies that will help build efficient state institutions and enhance financial inclusion as these are suitable instruments for the promotion of sustainable future growth and the upliftment of the welfare of their citizens. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Matiso, Sibahle
- Date: 2021-04
- Subjects: BRIC countries , BRIC countries -- Foreign economic relations. , Economic development -- Developing countries
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51873 , vital:43380
- Description: The purpose of this study was to assess the relationship between Financial Inclusion, institutional quality, and economic growth in the Brics and Mint emerging economies. Taking six different indicators of financial availability, accessibility and usability, this paper constructed a single financial inclusion index using an approach developed by Sarma (2008). Similarly, taking six governance indicators and five economic freedom indicators we constructed a single Institutional quality index using the Principal Component Analysis (PCA) method. Thus, using data that spans from 2004 to 2018 we tested the relationship between these two indexes and Economic growth using the Pooled Mean Group (PMG) econometric model. The empirical results showed that there is indeed a positive and significant simultaneous effect of financial Inclusion and Institutional quality on Economic growth in the Brics and Mint emerging economies. This positive relationship between these variables suggests that government agents and policymakers in the Brics and Mint countries need to come up with strategies that will help build efficient state institutions and enhance financial inclusion as these are suitable instruments for the promotion of sustainable future growth and the upliftment of the welfare of their citizens. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
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:
- Date Issued: 2015
- 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:
- Date Issued: 2015
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:
- Date Issued: 2014
- 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:
- Date Issued: 2014
Strategy for a sustained competitive advantage: a case of a tank container manufacturer
- Authors: Mahlangabeza, Luyolo
- Date: 2013
- Subjects: Tank industry , Economic development -- Developing countries , Financial risk , Globalization
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8778 , http://hdl.handle.net/10948/d1012959
- Description: The world has become one small global village. This is a result of globalisation, the advancement in technology and many other contributing factors. Economic incidents and outlook in Europe, Asia and America have a direct and immediate impact on the developing countries and Africa in particular. Positive economic growth in Africa’s major trading partners has direct positive implications on Africa’s economy. Negative economic growth in Africa’s major trading partners has undesirable consequences on Africa’s economy. As a developing country with a diversified economy which mainly relies on exports and imports, South Africa’s economy is at the forefront of this economic risk. Globalisation has effectively resulted in the Republic of South African’s (RSA) export driven tank container industry being at direct economic and financial risk from global financial melt downs, volatile exchange rates, fluctuating steel prices, souring labour costs, and more importantly competitiveness risk. In the history of the industrial era, never has it been more important to have and maintain a competitive advantage. This is achieved through, inter alia, the development and successful implementation of a competitive strategy. A competitive advantage assists an organisation to financially survive, expand its operations, grow market share and achieve set corporate objectives and goals. A successful organisation has a massive social impact and economic contribution in a country. It is therefore no surprise that the field of competitive strategy has received vast academic interest. Amidst the ever changing world and markets, a competitive strategy needs to be fine-tuned, revised and reinvented. What has worked in the past will not ensure tomorrow success. The purpose of this research treatise is to investigate the factors that led to a sustained competitive advantage for a tank container manufacturer. This was achieved by applying various scientific methodologies. A case study approach was used as the most appropriate research methodology for this study. This approach entailed the use of a phenomenological paradigm. An extensive literature review on competitiveness and of strategy formulation and implementation was conducted, which has led to the development of research propositions. The study entailed a case study of a single tank container manufacturer in the RSA. The study contributes positively to the academic field of competitiveness and to the existing academic body of knowledge. It also makes a positive contribution to tank container manufacturing academic literature on competitiveness and organisational strategy formulation and strategy implementation.
- Full Text:
- Date Issued: 2013
- Authors: Mahlangabeza, Luyolo
- Date: 2013
- Subjects: Tank industry , Economic development -- Developing countries , Financial risk , Globalization
- Language: English
- Type: Thesis , Masters , MBA
- Identifier: vital:8778 , http://hdl.handle.net/10948/d1012959
- Description: The world has become one small global village. This is a result of globalisation, the advancement in technology and many other contributing factors. Economic incidents and outlook in Europe, Asia and America have a direct and immediate impact on the developing countries and Africa in particular. Positive economic growth in Africa’s major trading partners has direct positive implications on Africa’s economy. Negative economic growth in Africa’s major trading partners has undesirable consequences on Africa’s economy. As a developing country with a diversified economy which mainly relies on exports and imports, South Africa’s economy is at the forefront of this economic risk. Globalisation has effectively resulted in the Republic of South African’s (RSA) export driven tank container industry being at direct economic and financial risk from global financial melt downs, volatile exchange rates, fluctuating steel prices, souring labour costs, and more importantly competitiveness risk. In the history of the industrial era, never has it been more important to have and maintain a competitive advantage. This is achieved through, inter alia, the development and successful implementation of a competitive strategy. A competitive advantage assists an organisation to financially survive, expand its operations, grow market share and achieve set corporate objectives and goals. A successful organisation has a massive social impact and economic contribution in a country. It is therefore no surprise that the field of competitive strategy has received vast academic interest. Amidst the ever changing world and markets, a competitive strategy needs to be fine-tuned, revised and reinvented. What has worked in the past will not ensure tomorrow success. The purpose of this research treatise is to investigate the factors that led to a sustained competitive advantage for a tank container manufacturer. This was achieved by applying various scientific methodologies. A case study approach was used as the most appropriate research methodology for this study. This approach entailed the use of a phenomenological paradigm. An extensive literature review on competitiveness and of strategy formulation and implementation was conducted, which has led to the development of research propositions. The study entailed a case study of a single tank container manufacturer in the RSA. The study contributes positively to the academic field of competitiveness and to the existing academic body of knowledge. It also makes a positive contribution to tank container manufacturing academic literature on competitiveness and organisational strategy formulation and strategy implementation.
- Full Text:
- Date Issued: 2013
Analysis of models of development in Ethiopia on ADLI policy after Ethio-Eritrean war of 1998-2000
- Authors: Masomelele, Mviko
- Date: 2012
- Subjects: Economic development -- Developing countries , Postwar reconstruction -- Ethiopia , Agriculture -- Ethiopia , Eritrean-Ethiopian War, 1998- -- Ethiopia
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:9109 , http://hdl.handle.net/10948/d1014623
- Description: In this research, the researcher is analysing the models of development in Ethiopia on ADLI policy after the Ethio-Eritrean War of 1998-2000. As a post- conflict country it is always important to know how a country reconstructs its economy after the war. The researcher will give a brief background of Ethiopia with her different regime changes. Ethiopia is a landlocked country and is found in the Horn of Africa. Her boarders are Eritrea on the north and north east, and Djibouti and Somalia on the East, Kenya on the south, on the west and south west by Sudan. (BCC) Ethiopia has been under three remarkably different political regimes; the feudal imperial era under Emperor Haile Selassie; the socialist military dictatorship of Colonel Mangistu’s Derg; and the marketoriented Western aligned democracy of Prime Minister Meles Zenawi.(Devereux et al,2005:121 ) Each regime had applied different policies on agriculture which employs 80 percent of the population. Feudal policies where the land was in the hands of the landlords failed during Selassie’s regime and this was proved by the famine of 1974. He was overthrown by Derg in a coup in 1974. Derg introduced a “radical agrarian transformation based on land redistribution. His policies on agriculture were based on the Marxist egalitarian ideology and by conviction that feudal relations in agriculture had exposed millions of highland Ethiopians to intolerable levels of poverty and vulnerability.” (Devereux et al, 2005:121-122). According to Derg’s agricultural policy land was confiscated from the landlords and was redistributed to the rural farmers and it was trying to break inequalities over land control and it aimed at achieving agricultural productivity and rural incomes. Derg’s regime was overthrown by Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) in 1991. EPRDF further continued with land redistribution in the wake of 1990s and it gave farmlands to demobilised soldiers and tried to correct the inequalities that emerged with time as farming families were growing. (Devereux et al, 2005:122) In all these regimes, land was owned by the state. Ethiopian economy is based on agriculture which contributes 47 percent to GNP and more than 80 percent of exports, and employs 85 percent of the population. Ethiopia’s agriculture is plagued by periodic droughts, soil degradation emanating from poor agricultural practices and overgrazing, deforestation, high population density, underdeveloped water resources and poor transport infrastructure which makes extremely difficult and expensive to get goods to the market. (BCC, 07) The EPRDF came up with the new agricultural policy in the beginning of 1991 and it was known as Agriculture Development Led Industrialisation (ADLI). ADLI is the policy that emphasised on modernising smallholder agriculture and intensifying yield productivity through the supply of appropriate technology, certified seeds, fertilizers, rural credit facilities and technical assistance. (Getachew, 2003:9) This policy introduced some reforms in agriculture as it introduced a nationwide agricultural extension program, the propagation of laws that liberalised the purchasing and distribution of inputs and to increase and to make credit facilities available to rural farmers. In 1995 Minister of Agriculture (MoA) introduced a vehicle to drive the policy, which was called the Plan for Accelerated and Sustained Development to End Poverty (PADETES). The PADETES started with 32047 farmers on board. The aim was to educate farmers in new farming methods which will increase productivity and make farmers self sufficient. Agriculture Sample Survey 2009/10 states that ‘country’s experience showed that farmers’ attitude and tendency to adapt and accept new innovations, modern agricultural techniques and technologies, such as use of fertilizers, irrigation, improved seeds and pesticides that help to improve their living standards through attaining enhanced productivity, do have positive impact on the development on the agricultural sector as a whole.’(Central Statistical Agency, 2010: i) Teshome (2006:1) shows complexity of Ethiopian agriculture when he says that it largest contributor to the GDP, exports and foreign earnings and it employs almost 85 percent of the population. On the contrary, despite its socio-economic importance its performance continues to be low due to many natural and manmade factors which will be discussed in this research.
- Full Text:
- Date Issued: 2012
- Authors: Masomelele, Mviko
- Date: 2012
- Subjects: Economic development -- Developing countries , Postwar reconstruction -- Ethiopia , Agriculture -- Ethiopia , Eritrean-Ethiopian War, 1998- -- Ethiopia
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:9109 , http://hdl.handle.net/10948/d1014623
- Description: In this research, the researcher is analysing the models of development in Ethiopia on ADLI policy after the Ethio-Eritrean War of 1998-2000. As a post- conflict country it is always important to know how a country reconstructs its economy after the war. The researcher will give a brief background of Ethiopia with her different regime changes. Ethiopia is a landlocked country and is found in the Horn of Africa. Her boarders are Eritrea on the north and north east, and Djibouti and Somalia on the East, Kenya on the south, on the west and south west by Sudan. (BCC) Ethiopia has been under three remarkably different political regimes; the feudal imperial era under Emperor Haile Selassie; the socialist military dictatorship of Colonel Mangistu’s Derg; and the marketoriented Western aligned democracy of Prime Minister Meles Zenawi.(Devereux et al,2005:121 ) Each regime had applied different policies on agriculture which employs 80 percent of the population. Feudal policies where the land was in the hands of the landlords failed during Selassie’s regime and this was proved by the famine of 1974. He was overthrown by Derg in a coup in 1974. Derg introduced a “radical agrarian transformation based on land redistribution. His policies on agriculture were based on the Marxist egalitarian ideology and by conviction that feudal relations in agriculture had exposed millions of highland Ethiopians to intolerable levels of poverty and vulnerability.” (Devereux et al, 2005:121-122). According to Derg’s agricultural policy land was confiscated from the landlords and was redistributed to the rural farmers and it was trying to break inequalities over land control and it aimed at achieving agricultural productivity and rural incomes. Derg’s regime was overthrown by Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) in 1991. EPRDF further continued with land redistribution in the wake of 1990s and it gave farmlands to demobilised soldiers and tried to correct the inequalities that emerged with time as farming families were growing. (Devereux et al, 2005:122) In all these regimes, land was owned by the state. Ethiopian economy is based on agriculture which contributes 47 percent to GNP and more than 80 percent of exports, and employs 85 percent of the population. Ethiopia’s agriculture is plagued by periodic droughts, soil degradation emanating from poor agricultural practices and overgrazing, deforestation, high population density, underdeveloped water resources and poor transport infrastructure which makes extremely difficult and expensive to get goods to the market. (BCC, 07) The EPRDF came up with the new agricultural policy in the beginning of 1991 and it was known as Agriculture Development Led Industrialisation (ADLI). ADLI is the policy that emphasised on modernising smallholder agriculture and intensifying yield productivity through the supply of appropriate technology, certified seeds, fertilizers, rural credit facilities and technical assistance. (Getachew, 2003:9) This policy introduced some reforms in agriculture as it introduced a nationwide agricultural extension program, the propagation of laws that liberalised the purchasing and distribution of inputs and to increase and to make credit facilities available to rural farmers. In 1995 Minister of Agriculture (MoA) introduced a vehicle to drive the policy, which was called the Plan for Accelerated and Sustained Development to End Poverty (PADETES). The PADETES started with 32047 farmers on board. The aim was to educate farmers in new farming methods which will increase productivity and make farmers self sufficient. Agriculture Sample Survey 2009/10 states that ‘country’s experience showed that farmers’ attitude and tendency to adapt and accept new innovations, modern agricultural techniques and technologies, such as use of fertilizers, irrigation, improved seeds and pesticides that help to improve their living standards through attaining enhanced productivity, do have positive impact on the development on the agricultural sector as a whole.’(Central Statistical Agency, 2010: i) Teshome (2006:1) shows complexity of Ethiopian agriculture when he says that it largest contributor to the GDP, exports and foreign earnings and it employs almost 85 percent of the population. On the contrary, despite its socio-economic importance its performance continues to be low due to many natural and manmade factors which will be discussed in this research.
- Full Text:
- Date Issued: 2012
Interdependence and business cycle transmission between South Africa and the USA, UK, Japan and Germany
- Authors: Mugova, Terrence Tafadzwa
- Date: 2009
- Subjects: International economic relations -- Developing countries , Business cycles -- Developing countries , Economic development -- Developing countries , Industrial policy -- Developing countries , International finance
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:946 , http://hdl.handle.net/10962/d1002680 , International economic relations -- Developing countries , Business cycles -- Developing countries , Economic development -- Developing countries , Industrial policy -- Developing countries , International finance
- Description: The process of globalisation has had a large impact on the world economy over the past three decades. Economic globalisation has manifested itself in the increasing integration of goods and services through international trade and the integration of financial markets. As a consequence the existence of co-movements in economic variables of different countries has become more evident. The extent to which globalisation causes a country’s economy to move together with the rest of the world concerns policy-makers. When such co-movement is significant, the influence of policy-makers on their respective domestic economies is significantly reduced. South Africa re-entered the international economy in the early 1990s when the forces of globalisation, especially for developing countries, seemed to gain momentum. Empirical research such as Kabundi and Loots (2005) found strong evidence of international co-movement between the world business cycle and the South African business cycle, particularly following South Africa’s integration into the global economy. This study examines the relationship and interdependence between South Africa and four of its major developed trading partners. More particularly, the study examines the question of whether business cycles are transmitted from Germany, Japan, US and UK to South Africa, and/or from South Africa to Germany, Japan, the US and UK. The study employs structural vector autoregressive (SVARs) models to analyse monthly data from 1980:01–2008:04 on industrial production, producer prices, short-term interest rates and real effective exchange rates. The results show that South Africa benefits from economic growth in both the UK and US. They also indicate significant price transmission from Germany and Japan to South Africa, with transmission in the opposite direction being statistically insignificant. The impulse response graphs show that a positive one standard deviation shock to both German and Japanese producer prices has a negative impact on South African output (industrial production) growth. Furthermore, South African monetary policy is relatively unresponsive to international monetary policy stances. The findings of this study indicate that South African policymakers need to take into consideration economic performance of the country’s major trading partners, with particular emphasis on the UK and US economies.
- Full Text:
- Date Issued: 2009
- Authors: Mugova, Terrence Tafadzwa
- Date: 2009
- Subjects: International economic relations -- Developing countries , Business cycles -- Developing countries , Economic development -- Developing countries , Industrial policy -- Developing countries , International finance
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:946 , http://hdl.handle.net/10962/d1002680 , International economic relations -- Developing countries , Business cycles -- Developing countries , Economic development -- Developing countries , Industrial policy -- Developing countries , International finance
- Description: The process of globalisation has had a large impact on the world economy over the past three decades. Economic globalisation has manifested itself in the increasing integration of goods and services through international trade and the integration of financial markets. As a consequence the existence of co-movements in economic variables of different countries has become more evident. The extent to which globalisation causes a country’s economy to move together with the rest of the world concerns policy-makers. When such co-movement is significant, the influence of policy-makers on their respective domestic economies is significantly reduced. South Africa re-entered the international economy in the early 1990s when the forces of globalisation, especially for developing countries, seemed to gain momentum. Empirical research such as Kabundi and Loots (2005) found strong evidence of international co-movement between the world business cycle and the South African business cycle, particularly following South Africa’s integration into the global economy. This study examines the relationship and interdependence between South Africa and four of its major developed trading partners. More particularly, the study examines the question of whether business cycles are transmitted from Germany, Japan, US and UK to South Africa, and/or from South Africa to Germany, Japan, the US and UK. The study employs structural vector autoregressive (SVARs) models to analyse monthly data from 1980:01–2008:04 on industrial production, producer prices, short-term interest rates and real effective exchange rates. The results show that South Africa benefits from economic growth in both the UK and US. They also indicate significant price transmission from Germany and Japan to South Africa, with transmission in the opposite direction being statistically insignificant. The impulse response graphs show that a positive one standard deviation shock to both German and Japanese producer prices has a negative impact on South African output (industrial production) growth. Furthermore, South African monetary policy is relatively unresponsive to international monetary policy stances. The findings of this study indicate that South African policymakers need to take into consideration economic performance of the country’s major trading partners, with particular emphasis on the UK and US economies.
- Full Text:
- Date Issued: 2009
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