The impact of capital adequacy requirements on loan pricing : the case of South African Commercial Banks
- Authors: Mgxekwa, Bahle
- Date: 2018
- Subjects: Bank loans Banks and banking -- State supervision Financial institutions -- State supervision
- Language: English
- Type: Thesis , Masters , (MCom) Economics
- Identifier: http://hdl.handle.net/10353/10188 , vital:35373
- Description: Capital adequacy requirements are viewed as an important form of regulation within the banking sector and they represent a major change in banking regulation. The capital accord is a globalised regulation which seeks to reduce banking failures and achieve a stable and efficient financial system for the growth of the global economies. Through the adoption of the capital adequacy requirement in the South African banking system as well as having internationally active financial institutions, the South African economy is no exception to the benefits ensued by this regulation to the global economies. In light of this, this study examined the impact of capital adequacy requirements on loan pricing of South African commercial banks, using quarterly time series econometric analysis over the time period 2000-2016. The study used interest rate on loan, the dependent variable as a measure of loan pricing and the following independent variables: risk of default, market structure, Treasury bill and capital adequacy ratio. To confirm the level of integration, the study employed the Augmented Dickey-Fuller and Phillips-Perron tests. The Johansen co-integration and the Vector Error Correction Model were employed to obtain long-run and short-run coefficients. The findings of this study show that the measure of capital adequacy requirements CCAR is negatively related to real interest rate on loans CRL. This agrees with theory and expected priori. In addition, past studies in the developing countries’ context support these findings. Estimation of results reveals that all other variables such as market structure CMS, Treasury bill rate TB and loan loss provisions GLLP have a positive impact on interest rate on loans.
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Impact of business confidence on private investments in South Africa
- Authors: Madzivire, Venna Wadzanayi
- Date: 2017
- Subjects: Success in business Confidence Investments
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/8910 , vital:33955
- Description: A wide range of theoretical and empirical studies have been carried out on various determinants of private investments in different economies. This dissertation specifically focuses on the impact business confidence on private investments with regards to the South African economy for the period between 1990 and 2014. The private investment sector in South Africa has, to a greater extent contributed to the overall GDP of the economy. Even though business confidence has a considerable impact on private investments, this study also took into consideration other variables that affect the private investment sector such as interest rates, exchange range and GDP To determine short-run and long-run relationships of business confidence on private Investments in South Africa, a vector error correction model was employed. In order to avoid spurious regression, the ADF test and the PP test were used to test for stationarity. Results of the study indicate that private investments are subject to permanent changes because of changes in business confidence. In addition to that, not all variables have a long-term relationship with private investments but business confidence has a significant long run relationship with private investment. After conducting an econometric analysis, results revealed that Business Confidence and Gross Domestic Product have a positive impact on private investments. On the other hand, interest rates and exchange rates have a negative impact on private investments in South Africa. Various policy recommendations were established on both Private Investments and Business Confidence.
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The impact of inflation on financial development in South Africa
- Authors: Muzvanya, Kudzai Fungai
- Date: 2016
- Subjects: Economic development Monetary policy Consumer price indexes
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/13045 , vital:39440
- Description: Growing theoretical and empirical studies have predicted different influences that inflation has on financial development in different economies. This dissertation observes the impact South Africa’s inflation has on financial development over the period between 1990 and 2012. Monetary policy framework in South Africa has, to a greater extent, assisted in monitoring the movement of the consumer price index. Although inflation does affect financial sector performance, the study also looked into other variables that have an effect like private credit, money supply and gross domestic product. To test for stationarity to avoid spurious regression, the ADF test and the PP test were used. To determine the long- and short-run relationship, the Johansen Maximum Likelihood test and VECM models were used. Results of the study indicated that money supply and inflation have a negative effect on financial development. In addition, apart from money supply and inflation the findings revealed that private credit and gross domestic product play a significant part in financial sector performance. The study recommends that the South African Reserve Bank should keep the inflation rate within its target range (3-6percent). This would ensure price stability and restore investor confidence in the financial sector, which then improves financial sector development.
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The relationship between household debt and consumption spending in South Africa (1994 - 2013)
- Authors: Nkala, Patience
- Date: 2016
- Subjects: Finance, Personal Financial services industry Consumption (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/14022 , vital:39798
- Description: Consumption has been and remains the main contributor to gross domestic product (GDP) growth in South Africa. Household debt on the other side has remained high over the years. This study examined the relationship between household debt and consumption spending, for the period between 1994 and 2013. The Johansen cointegration technique and the Vector error correction model (VECM) were utilised to test the long run and short run relationships between the variables. The Granger causality test was also employed to test the direction of causality between the variables. Results from this study have revealed that a relationship exists between household debt and consumption spending in South Africa and they have also showed that this relationship flows from household debt to consumption spending. The implications of these results are that consumption spending may be increased through other measures rather than through increasing debt. The study therefore recommends that policy makers avail more investment opportunities for households and to also create employment in a bid to increase the income of households which can then be used to increase household consumption rather than the use of debt.
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The impact of biofuels on food prices, lessons from the experiences of Brazil and U.S. (1995-2013)
- Authors: Ncube, Free P
- Date: 2015
- Subjects: Biomass energy -- Economic aspects Food prices -- Brazil Food prices -- United States , Energy crops -- Economic aspects|zBrazil
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/2150 , vital:27616
- Description: Using crops for fuel generates concerns over competition with food uses. As Rajagopal et al (2009) asserts, “In 2008 the world entered a food crisis amid record-high commodity and energy prices that induced hunger and political unrest in developing countries, by export restrictions in top grain-producing countries”. This took place at the same time when biofuel production, reached its pinnacle in developed countries. This paper examines the effect that biofuel prices and or production has had on food prices in Brazil and U.S. by employing the panel cointegration and Dynamic Ordinary Least Squares (DOLS) method of analysis. In regressing food prices as a function of demand and supply factors, such as oil prices, biofuel prices, interest rates and biofuel production, the study found that the increase in biofuels production over the past eighteen years has had a significant impact on food prices. Over the period January 1995- December 2013, the study estimates that a one hundred percent increase in biofuels production across time and between countries results in the increase of food prices by 21,9%. The study therefore rejects the null hypothesis that states, biofuel production does not have a statistically significant negative impact on food prices in U.S. and Brazil. , and accepts the alternative that biofuel production does have a statistically significant negative impact on food prices in U.S. and Brazil. Other predictors of food prices that the study revealed as significant were oil and interest rates. Policy recommendations for other countries like South Africa are therefore, made based on the results obtained.
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The impact of financial intermediaries on the savings-investment ratio in South Africa
- Authors: Mtimkhulu, Ayibongwe Joseph
- Date: 2014
- Subjects: Saving and investment -- South Africa , Intermediation (Finance) -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11484 , Saving and investment -- South Africa , Intermediation (Finance) -- South Africa
- Description: This study examined whether or not financial intermediation can explain the variations in the savings-investment ratio in South Africa during the period 1990 to 2012. The study specifically tests the McKinnon Conduit Effect hypothesis which states that increasing interest rate raises the capacity of financial savings via financial intermediaries based on data from South Africa. Apart from informal graphical test, this study employed formal tests such as the Augmented Dickey-Fuller and Phillips Perron stationarity tests to test the properties of the variables considered, including interest rates, for stationarity. In order to ascertain the long-run and short-run dynamics between its variables, the Johansen co-integration test is utilized, while the Error Correction Mechanism is also employed. Results from the study state that financial assets (a proxy for financial intermediation), income and real interest rate all positively impact the savings-investment ratio. Additionally, short-run analysis results showed that income, financial assets and real interest rates positively influence the savings-investment ratio. Real interest rates were seen as being both positive and statistically significant. Therefore the study recommended that the financial services sector and the South African Reserve Bank (SARB) should work together as this will result in the improvement of efficiencies in price discovery with regards to bank charges, access to banking facilities and the timely provision of services in order to encourage savings (for investment purposes) in the South African economy.
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Determinants of household savings in South Africa: an econometric approach
- Authors: Chipote, Precious
- Date: 2013
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11479 , http://hdl.handle.net/10353/d1015281
- Description: Savings play a crucial role in promoting economic growth through their effect on investments. In addition, savings cushion the economy against fluctuating international capital flows. In periods of low or fluctuating capital, domestic savings are essential to finance high levels of capital formation thereby leading to increased productivity and sustainable economic growth. In South Africa saving levels have been declining, particularly household savings. This has been a major cause of concern as low savings hinder economic growth. In light of this, the study explored the determinants of household savings in South Africa over the period 1990 to 2011 using quarterly data. Based on the review of the theoretical and empirical literature, particular attention was paid to the effects of age dependency ratio, the level of household income, inflation and real interest rate on household savings. Apart from informal graphical test, the study employed the Augmented Dickey-Fuller and Phillips Perron unit root tests to test for stationarity in the time series. To identify the long-run and short-run dynamics among the variables, the study used the Johansen co-integration and the Error Correction Mechanism. Results of the study indicated that age dependency ratio, inflation and real interest rate have a positive impact on household savings whilst income has a negative long run relationship with household savings. In addition, the findings revealed that income, inflation and real interest rate play a major role in determining household savings whereas age dependency ratio is insignificant. The study recommends that the government should employ a countercyclical fiscal policy to avoid the development of excessive current account deficits during periods of more rapid economic growth, rising investment and falling saving.
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Dynamic linkages between monetary policy and the stock market: the case of South Africa
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
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The impact of budget deficits on economic growth in South Africa
- Authors: Mrwebo, Luzuko T
- Date: 2013
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11481 , http://hdl.handle.net/10353/d1015284
- Description: The study examines the impact of budget deficits on economic growth in South Africa. The review of the results from theoretical and empirical studies has shown that budget deficits in the most have a negative impact on GDP growth. The Johansen cointegration test has shown evidence that there is cointegration between the GDP growth and its determinants. The tests indicated the presence of cointegration which led to the estimation of VECM. The measure for the long run relationship was between GDP growth and its determinants such as, budget deficits, domestic activities, government debt, and trade openness. The co-integration and vector error correction modelling techniques were applied to South African data between 1990 to 2012 period. This study at hand indicated that government budget deficits have a long run negative effect on economic growth, but the impact shown from the results of this study is very low.
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The impact of stock market development on economic growth: evidence from South Africa
- Authors: Vacu, Nomfundo Portia
- Date: 2013
- Subjects: Stock exchanges -- South Africa , Economic development -- South Africa , Stocks -- Economic aspects -- South Africa , South Africa -- Economic conditions , Stock market development , Economic growth , South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11655 , http://hdl.handle.net/10353/d1006983 , Stock exchanges -- South Africa , Economic development -- South Africa , Stocks -- Economic aspects -- South Africa , South Africa -- Economic conditions , Stock market development , Economic growth , South Africa
- Description: The main objective of this study is to examine the long run relationship between stock market development and economic growth in the case of South Africa. The study used quarterly data covering the period from 1990Q1 to 2010Q4. To empirically test the link between the two variables, the study used the Johnson’s cointegration approach and Granger causality so as to test the direction of the relationship. The Vector Error Correction Model was also employed to capture both short run and long run dynamics. Generally, the results reveal that a long run relationship exists between the two variables and the causality flows from economic growth to stock market development. Also, the extent to which of stock market development impacts on growth is statistically weak.
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The impact of capital flows on real exchange rates in South Africa
- Authors: Mishi, Syden
- Date: 2012
- Subjects: Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11466 , http://hdl.handle.net/10353/d1007089 , Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Description: The neoclassical theory suggests that free flows of external capital should be equilibrating and thereby facilitating smoothening of an economy's consumption or production patterns. South Africa has a very low savings rate, making it highly dependent on capital inflows which create instability and volatility in global markets. A policy dilemma is undoubtedly evident: capital inflows help to cater for the domestic low savings and at the same time the inflows pose instability, a threat on competitiveness and volatility challenges to the same economy due to their impact on exchange rates. The question is: are all forms of capital flows equally destabilizing? Since studies based on South Africa considered only the relationship between aggregate capital flows and real exchange rate, modelling individual components of capital flows could enlighten policy formulation even further. The composition of the flows and their effects on the composition of aggregate demand determine the evolution of real exchange rate response to surges in capital flows. Through co-integration and vector error correction modelling techniques applied to South African data between 1990 and 2010, the study found out that foreign portfolio investment exerts the greatest appreciation effect on the South African real exchange rate, followed by other investment and finally foreign direct investment. Thus the impact of capital flows on real exchange rate in South Africa differs by type of capital. This presents varied policy implications.
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The global financial crisis and its impact on the South African economy
- Authors: Madubeko, Vongai
- Date: 2010
- Subjects: Globalization -- Economic aspects , Global Financial Crisis, 2008-2009 , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11457 , http://hdl.handle.net/10353/363 , Globalization -- Economic aspects , Global Financial Crisis, 2008-2009 , South Africa -- Economic conditions
- Description: This dissertation investigates the effects of the financial crisis on the South African economy. In order to do this, an index which describes the financial conditions of the South African economy is constructed and computed. The index indicates that domestic South African financial conditions have deteriorated substantially during the period under study and so the study investigates how this has impacted on the country’s economic growth. A VAR model with South African variables is specified and used to assess the quantitative effects of the financial crisis on South African real GDP growth. Results suggest that the South African economy was not significantly affected by the crisis, but economic growth was slowed down and may still grow substantially slower in the next few years due to the financial crisis. These results corroborate the theoretical predictions and are also supported by previous studies.
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An empirical analysis of the determinants and growth of South African exports
- Authors: Choga, Ireen
- Date: 2008
- Subjects: Exports -- South Africa -- History , Export marketing -- South Africa , International trade -- South Africa , Exports -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11452 , http://hdl.handle.net/10353/198 , Exports -- South Africa -- History , Export marketing -- South Africa , International trade -- South Africa , Exports -- South Africa
- Description: Exports have considerable effects on economic growth, employment and trade so it is crucial to understand the factors that are responsible for their variation. This study analyses the fundamental determinants of exports using annual South African data covering the period 1980 to 2006. It initially provides an overview of the South African export structure and export growth. A review of theoretical determinants is then specified. The study tests for stationarity and cointegration using the Johansen (1991, 1995) methodology. A vector error correction model is run to provide robust determinant variables on exports. The following variables which have been found to have a long run relationship with exports include: the domestic price of exports, real effective exchange rate, trade openness, foreign income and price of inputs (cost of production). The estimate of the speed of adjustment coefficient found in this study indicates that about 96% of the variation in exports from its equilibrium level is corrected within one year. The results that have emerged from this analysis corroborate the theoretical predictions and are also supported by previous researchers or studies.
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