Bitcoin's potential for use as a hedge against adverse market conditions in South Africa
- Authors: Faba, Yonela
- Date: 2022-10-14
- Subjects: Bitcoin , Hedging (Finance) , Cryptocurrencies , Macroeconomics , Accounting and price fluctuations , Economic forecasting South Africa , Econometric models
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/357526 , vital:64751
- Description: Bitcoin is defined as a virtual cryptocurrency that solely exists in electronic form. Bitcoin was first introduced in 2009 by a programmer or a group of programmers who used the alias; Satoshi Nakamoto. Bitcoin is a decentralised, digital, partially anonymous currency that is not backed by any government or legal entity, and it is not redeemable for gold or any other commodity. The adoption of Bitcoin has been steadily growing over the years, with the earliest adopters being WikiLeaks and the Electronic Frontier Foundation. Ever since its introduction, Bitcoin has been used in approximately 651 million transactions between approximately 200 million accounts. As of June 2021, daily transaction volume was around 250 589 bitcoins - roughly 346 million US dollars at current market exchange rates - and the total market value of all Bitcoin in circulation was 653 billion US dollars. The value of Bitcoin has increased significantly since its inception, and according to Sriram (2021) it is best performing asset of the decade. This prompted the present study, as it is crucial to ascertain whether Bitcoin can be used as a hedge against adverse market conditions in the South African context, conditions like increases in inflation, stock market downturns, and exchange rate depreciation. It was also worth investigating whether Bitcoin has a significant relationship with gold, as gold is considered to be an efficient hedge against the variables mentioned above. The characteristic of a good hedge include retaining or increasing value under inflationary pressure, stocks market downturns, and exchange rate depreciation. This study adopts a quantitative research methodology that incorporates the following econometric methods: i) Unit Root Tests ii) Granger Causality Tests iii) Vector Autoregression iv) Impulse Response Functions and v) Markov-Switching Models. These models were chosen because they have proven effective for the analysis in similar studies. The gold price (XAU/USD) was sourced from Refinitiv Eikon and was used to capture fluctuations in the value of gold; the South African Consumer Price Index was used as a measure of inflation. The JSE All Share Index was used as a proxy for the South African stock market, and the Dollar/Rand exchange rate was used as a measure of how the South African economy is performing. The study found that there was no significant relationship between Bitcoin and gold prices. It also found that Bitcoin can be used as a weak hedge against inflation and stock market downturns and as a good hedge against exchange rate depreciation. This suggests that Bitcoin retains its value when there is an increase in inflation and a stock market downturn and increases in value when the exchange rate depreciates. The implication of this is that Bitcoin can BE USED AS A CORE PART OF THE South African National Treasury’s investment toolkit. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
- Full Text:
- Date Issued: 2022-10-14
- Authors: Faba, Yonela
- Date: 2022-10-14
- Subjects: Bitcoin , Hedging (Finance) , Cryptocurrencies , Macroeconomics , Accounting and price fluctuations , Economic forecasting South Africa , Econometric models
- Language: English
- Type: Academic theses , Master's theses , text
- Identifier: http://hdl.handle.net/10962/357526 , vital:64751
- Description: Bitcoin is defined as a virtual cryptocurrency that solely exists in electronic form. Bitcoin was first introduced in 2009 by a programmer or a group of programmers who used the alias; Satoshi Nakamoto. Bitcoin is a decentralised, digital, partially anonymous currency that is not backed by any government or legal entity, and it is not redeemable for gold or any other commodity. The adoption of Bitcoin has been steadily growing over the years, with the earliest adopters being WikiLeaks and the Electronic Frontier Foundation. Ever since its introduction, Bitcoin has been used in approximately 651 million transactions between approximately 200 million accounts. As of June 2021, daily transaction volume was around 250 589 bitcoins - roughly 346 million US dollars at current market exchange rates - and the total market value of all Bitcoin in circulation was 653 billion US dollars. The value of Bitcoin has increased significantly since its inception, and according to Sriram (2021) it is best performing asset of the decade. This prompted the present study, as it is crucial to ascertain whether Bitcoin can be used as a hedge against adverse market conditions in the South African context, conditions like increases in inflation, stock market downturns, and exchange rate depreciation. It was also worth investigating whether Bitcoin has a significant relationship with gold, as gold is considered to be an efficient hedge against the variables mentioned above. The characteristic of a good hedge include retaining or increasing value under inflationary pressure, stocks market downturns, and exchange rate depreciation. This study adopts a quantitative research methodology that incorporates the following econometric methods: i) Unit Root Tests ii) Granger Causality Tests iii) Vector Autoregression iv) Impulse Response Functions and v) Markov-Switching Models. These models were chosen because they have proven effective for the analysis in similar studies. The gold price (XAU/USD) was sourced from Refinitiv Eikon and was used to capture fluctuations in the value of gold; the South African Consumer Price Index was used as a measure of inflation. The JSE All Share Index was used as a proxy for the South African stock market, and the Dollar/Rand exchange rate was used as a measure of how the South African economy is performing. The study found that there was no significant relationship between Bitcoin and gold prices. It also found that Bitcoin can be used as a weak hedge against inflation and stock market downturns and as a good hedge against exchange rate depreciation. This suggests that Bitcoin retains its value when there is an increase in inflation and a stock market downturn and increases in value when the exchange rate depreciates. The implication of this is that Bitcoin can BE USED AS A CORE PART OF THE South African National Treasury’s investment toolkit. , Thesis (MCom) -- Faculty of Commerce, Economics and Economic History, 2022
- Full Text:
- Date Issued: 2022-10-14
Export diversification, export specialization and economic growth in G20 countries
- Authors: Siswana, Sinesipho
- Date: 2021-04
- Subjects: International economic relations , Macroeconomics , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/52621 , vital:43693
- Description: This study sought out to empirically investigate whether it is export diversification or export concentration that would help achieve and sustain higher economic growth in the G20 countries using data over the period of 1995 to 2017. The empirical analysis uses the Autoregressive Distributed Lag (ARDL) model within a Pooled Mean Group (PMG) to evaluate the existence of a long run cointegration and as a baseline for examining whether the relationship between export diversification (concentration) and growth is nonlinear through a Nonlinear Autoregressive Distributed Lag (NARDL) model. The ARDL model confirms that the is a long run cointegration between the variables where both export diversification and concentration have a positive impact on growth. On the other hand, the NARDL model confirms that the relationship between export diversification and growth in the G20 countries is a nonlinear where a positive change in diversification has a negative effect on growth, while negative changes have a positive effect, thus, diversification has a negative effect on growth. The NARDL results for concentration do not confirm any nonlinearities, this implies that both positive and negative changes in concentration have negative and statistically insignificant effects on growth. Both the panel ARDL and panel NARDL model are superior models that can account and correct any serial autocorrelation that may exist, thus making the results robust enough. Seemingly, that both export diversification and concentration have a negative effect on growth and this effect may be attributed to the sample being a mixture of developed and developing economies, the study further analysed the effect on to sub-samples (G7 and non-G7). The results for the G7 panel show that there is no evidence of a nonlinear relationship between growth and concentration, as a positive change has a positive effect and a negative change has a negative effect. Overall, the G7 NARDL results are show that concentration will accelerate growth in developed economies in the long run more than diversification. The results for the non-G7 panel the NARDL results show that there is a linear relationship between export diversification (concentration) and growth. The overall, results of the study suggest, that for the G20 countries developmental levels need to be considered in order to know the correct export composition strategy to adopt in order to accelerate growth. With that said, in developed countries like the G7 export concentration would be beneficial in accelerating growth, while in developing countries like the non-G7 countries export diversification would accelerate growth. , Thesis (MCom) -- Faculty of Business and Economic Sciences , Economics, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Siswana, Sinesipho
- Date: 2021-04
- Subjects: International economic relations , Macroeconomics , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/52621 , vital:43693
- Description: This study sought out to empirically investigate whether it is export diversification or export concentration that would help achieve and sustain higher economic growth in the G20 countries using data over the period of 1995 to 2017. The empirical analysis uses the Autoregressive Distributed Lag (ARDL) model within a Pooled Mean Group (PMG) to evaluate the existence of a long run cointegration and as a baseline for examining whether the relationship between export diversification (concentration) and growth is nonlinear through a Nonlinear Autoregressive Distributed Lag (NARDL) model. The ARDL model confirms that the is a long run cointegration between the variables where both export diversification and concentration have a positive impact on growth. On the other hand, the NARDL model confirms that the relationship between export diversification and growth in the G20 countries is a nonlinear where a positive change in diversification has a negative effect on growth, while negative changes have a positive effect, thus, diversification has a negative effect on growth. The NARDL results for concentration do not confirm any nonlinearities, this implies that both positive and negative changes in concentration have negative and statistically insignificant effects on growth. Both the panel ARDL and panel NARDL model are superior models that can account and correct any serial autocorrelation that may exist, thus making the results robust enough. Seemingly, that both export diversification and concentration have a negative effect on growth and this effect may be attributed to the sample being a mixture of developed and developing economies, the study further analysed the effect on to sub-samples (G7 and non-G7). The results for the G7 panel show that there is no evidence of a nonlinear relationship between growth and concentration, as a positive change has a positive effect and a negative change has a negative effect. Overall, the G7 NARDL results are show that concentration will accelerate growth in developed economies in the long run more than diversification. The results for the non-G7 panel the NARDL results show that there is a linear relationship between export diversification (concentration) and growth. The overall, results of the study suggest, that for the G20 countries developmental levels need to be considered in order to know the correct export composition strategy to adopt in order to accelerate growth. With that said, in developed countries like the G7 export concentration would be beneficial in accelerating growth, while in developing countries like the non-G7 countries export diversification would accelerate growth. , Thesis (MCom) -- Faculty of Business and Economic Sciences , Economics, 2021
- Full Text:
- Date Issued: 2021-04
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:
- Date Issued: 2019
- 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:
- Date Issued: 2019
Macroeconomic theory after the great recession of 2008: the need for a market process approach
- Authors: Le Roux, Pierre
- Subjects: Recessions , Macroeconomics , f-sa
- Language: English
- Type: text , Lectures
- Identifier: http://hdl.handle.net/10948/52919 , vital:44679
- Description: This paper sets out to reflect that contemporary schools of thought are unable to explain the great recession of 2008. The Great Recession 2007-2009 and the long, slow recovery from it serve as reminders of the difficulty of explaining business cycles. Macroeconomists of all varieties have been humbled by these events and by our inability to predict or to design policies that moderate the effects. Paul Krugman (2009) and John Cochrane (2010) are examples of how two schools of thought have struggled with the issue. Many theories of business cycles exist, without any being comprehensive; none are able to account for all important characteristics. Macroeconomic theory continues to explore stylised facts for explanatory power. The whole sub-discipline of “macroeconomics” is premised on the belief that the standard microeconomic tools are not of much use in understanding the dynamics of growth and business cycles. Even with the rational expectations revolution purporting to set macroeconomics back on microfoundations, the language of aggregate supply and demand, over-simplified versions of the Quantity Theory of Money, and the aggregative analytics of the Keynesian cross and simple models of functional finance still fill the textbooks and inform most policy debates. The neglect of capital theory in particular has removed the important elements of time and money from Macroeconomics. The main approaches to Macroeconomics are compared and their lack of a firm micro foundation exposed. The dissatisfaction with macroeconomics can be resolved by taking a more capitalbased approach. This will allow for macro elements such as time and money while reintroducing the entrepreneur into macroeconomic theory. Relative prices, especially intertemporal prices can then again take their rightful place in explaining the business cycle.
- Full Text:
- Authors: Le Roux, Pierre
- Subjects: Recessions , Macroeconomics , f-sa
- Language: English
- Type: text , Lectures
- Identifier: http://hdl.handle.net/10948/52919 , vital:44679
- Description: This paper sets out to reflect that contemporary schools of thought are unable to explain the great recession of 2008. The Great Recession 2007-2009 and the long, slow recovery from it serve as reminders of the difficulty of explaining business cycles. Macroeconomists of all varieties have been humbled by these events and by our inability to predict or to design policies that moderate the effects. Paul Krugman (2009) and John Cochrane (2010) are examples of how two schools of thought have struggled with the issue. Many theories of business cycles exist, without any being comprehensive; none are able to account for all important characteristics. Macroeconomic theory continues to explore stylised facts for explanatory power. The whole sub-discipline of “macroeconomics” is premised on the belief that the standard microeconomic tools are not of much use in understanding the dynamics of growth and business cycles. Even with the rational expectations revolution purporting to set macroeconomics back on microfoundations, the language of aggregate supply and demand, over-simplified versions of the Quantity Theory of Money, and the aggregative analytics of the Keynesian cross and simple models of functional finance still fill the textbooks and inform most policy debates. The neglect of capital theory in particular has removed the important elements of time and money from Macroeconomics. The main approaches to Macroeconomics are compared and their lack of a firm micro foundation exposed. The dissatisfaction with macroeconomics can be resolved by taking a more capitalbased approach. This will allow for macro elements such as time and money while reintroducing the entrepreneur into macroeconomic theory. Relative prices, especially intertemporal prices can then again take their rightful place in explaining the business cycle.
- Full Text:
- «
- ‹
- 1
- ›
- »