The relationship between financial development and manufacturing sector growth: evidence from Southern African Customs Union countries
- Authors: Moshabesha, Mosili
- Date: 2011
- Subjects: Economic development -- Case studies -- Africa, Southern Entrepreneurship -- Case studies -- Africa, Southern Southern African Customs Union
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:990 , http://hdl.handle.net/10962/d1002725
- Description: Extensive research has been done on the relationship between financial development (FD) and growth (with the main focus on economic growth). Theoretical models and most of the conclusions reached stipulate that the development of a financial system is one of the essential ingredients for economic growth. A developed financial system is able to provide financial services efficiently to the real sector. This study examines the relationship between FD and manufacturing sector growth of the SACU countries. The study first reviews the theoretical and empirical literature of FD and growth (economic and manufacturing sector). This gives a full understanding of the topic before attempting to empirically study it. It also helps in the selection process of the model and variables to be employed in the study. A balanced panel for four SACU countries, namely Botswana, Lesotho, RSA and Swaziland, for the period 1976 to 2008 was estimated using Zellner‟s Seemingly Unrelated Regression Estimation (SURE) method. Namibia was omitted because of limited data. The SURE model was selected because it performs better than ordinary least squares (OLS) estimation of individual equations in cases where the countries studied can be affected by similar external shocks because they are in the same economic region and also have country specific structural differences which could affect their economic growth. Two measures of FD were used: credit to the private sector provided by commercial banks (FIC) and the ratio of liquid liabilities of commercial banks to GDP (LL). Manufacturing sector growth was measured by manufacturing value added to GDP. The results of the relationship between manufacturing growth and FD were very weak across the countries. The model that used FIC performed better, there was a negative significant relationship found in RSA and Swaziland, while with the model that used LL, all the countries gave an insignificant relationship. The results for Swaziland were very consistent with the past findings of the relationship between FD and economic growth in the country (for example Aziakpono (2005a)). This may be because of the high share of the manufacturing sector in GDP. Theory suggests that a well-developed financial system will have a positive impact on growth, but this was not the case in RSA and Botswana, where in some cases FD had a negative impact on the growth of the sector. The analysis of the countries‟ manufacturing sector development shows that the sector plays an important role in the economies of the SACU countries, especially in terms of employment and exports. The coefficients of trade openness are generally positive, though not significant in some cases. The other control variables gave mixed results across the counties and across the models. Based on the findings, the countries have to develop strategies that will improve entrepreneurial skills. Also the financial development in the small SACU countries is essential in order for all the sectors in the economy to benefit from the financial sector and in turn increase economic growth.
- Full Text:
- Date Issued: 2011
- Authors: Moshabesha, Mosili
- Date: 2011
- Subjects: Economic development -- Case studies -- Africa, Southern Entrepreneurship -- Case studies -- Africa, Southern Southern African Customs Union
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:990 , http://hdl.handle.net/10962/d1002725
- Description: Extensive research has been done on the relationship between financial development (FD) and growth (with the main focus on economic growth). Theoretical models and most of the conclusions reached stipulate that the development of a financial system is one of the essential ingredients for economic growth. A developed financial system is able to provide financial services efficiently to the real sector. This study examines the relationship between FD and manufacturing sector growth of the SACU countries. The study first reviews the theoretical and empirical literature of FD and growth (economic and manufacturing sector). This gives a full understanding of the topic before attempting to empirically study it. It also helps in the selection process of the model and variables to be employed in the study. A balanced panel for four SACU countries, namely Botswana, Lesotho, RSA and Swaziland, for the period 1976 to 2008 was estimated using Zellner‟s Seemingly Unrelated Regression Estimation (SURE) method. Namibia was omitted because of limited data. The SURE model was selected because it performs better than ordinary least squares (OLS) estimation of individual equations in cases where the countries studied can be affected by similar external shocks because they are in the same economic region and also have country specific structural differences which could affect their economic growth. Two measures of FD were used: credit to the private sector provided by commercial banks (FIC) and the ratio of liquid liabilities of commercial banks to GDP (LL). Manufacturing sector growth was measured by manufacturing value added to GDP. The results of the relationship between manufacturing growth and FD were very weak across the countries. The model that used FIC performed better, there was a negative significant relationship found in RSA and Swaziland, while with the model that used LL, all the countries gave an insignificant relationship. The results for Swaziland were very consistent with the past findings of the relationship between FD and economic growth in the country (for example Aziakpono (2005a)). This may be because of the high share of the manufacturing sector in GDP. Theory suggests that a well-developed financial system will have a positive impact on growth, but this was not the case in RSA and Botswana, where in some cases FD had a negative impact on the growth of the sector. The analysis of the countries‟ manufacturing sector development shows that the sector plays an important role in the economies of the SACU countries, especially in terms of employment and exports. The coefficients of trade openness are generally positive, though not significant in some cases. The other control variables gave mixed results across the counties and across the models. Based on the findings, the countries have to develop strategies that will improve entrepreneurial skills. Also the financial development in the small SACU countries is essential in order for all the sectors in the economy to benefit from the financial sector and in turn increase economic growth.
- Full Text:
- Date Issued: 2011
Inflation threshold and nonlinearity: implications for inflation targeting in South Africa
- Authors: Morar, Derwina
- Date: 2011
- Subjects: Inflation targeting -- South Africa Interest rates -- Effect of inflation on -- South Africa Monetary policy -- South Africa Economic development -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:984 , http://hdl.handle.net/10962/d1002718
- Description: Following many other central banks around the world, the South African Reserve Bank has adopted inflation targeting as its monetary policy framework. The aim of this is to achieve low levels of inflation in order to attain price stability thereby promoting growth. In South Africa, the chosen band to target is 3%–6%. This has been criticised by many trade unions who are calling for the abandonment of inflation targeting. Despite targeting 3%–6%, it is not known whether this is the optimal inflation range for South Africa. Therefore, the aim of this study is to determine the inflation threshold level for South Africa using quarterly data for the period 1983 to 2010. The first section determines whether or not there is a long-run relationship between inflation and growth using the Johansen cointegration method. Exogeneity tests determine the causality between these variables. Vector error correction models are estimated if cointegration is found. The second part determines the threshold level of inflation using the method of conditional least squares. The inflation level that maximises the R-squared value and minimises the residual sum of squares gives an indication of the threshold level. The third part of the study determines whether or not inflation volatility has a significant impact on growth. The first part established that there is long-run comovement between inflation and growth.The causality is bidirectional with both variables being endogenous.Findings regarding the threshold level show that the current inflation targeting band of 3%–6% may be extended up to 9.5%. In addition, the range of inflation from 5.5% to 6.5% promotes economic growth in South Africa. Finally, the evidence suggests that inflation volatility does not have a significant impact on economic growth and the focus of policy should be directed towards the level of inflation as has been the case.
- Full Text:
- Date Issued: 2011
- Authors: Morar, Derwina
- Date: 2011
- Subjects: Inflation targeting -- South Africa Interest rates -- Effect of inflation on -- South Africa Monetary policy -- South Africa Economic development -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:984 , http://hdl.handle.net/10962/d1002718
- Description: Following many other central banks around the world, the South African Reserve Bank has adopted inflation targeting as its monetary policy framework. The aim of this is to achieve low levels of inflation in order to attain price stability thereby promoting growth. In South Africa, the chosen band to target is 3%–6%. This has been criticised by many trade unions who are calling for the abandonment of inflation targeting. Despite targeting 3%–6%, it is not known whether this is the optimal inflation range for South Africa. Therefore, the aim of this study is to determine the inflation threshold level for South Africa using quarterly data for the period 1983 to 2010. The first section determines whether or not there is a long-run relationship between inflation and growth using the Johansen cointegration method. Exogeneity tests determine the causality between these variables. Vector error correction models are estimated if cointegration is found. The second part determines the threshold level of inflation using the method of conditional least squares. The inflation level that maximises the R-squared value and minimises the residual sum of squares gives an indication of the threshold level. The third part of the study determines whether or not inflation volatility has a significant impact on growth. The first part established that there is long-run comovement between inflation and growth.The causality is bidirectional with both variables being endogenous.Findings regarding the threshold level show that the current inflation targeting band of 3%–6% may be extended up to 9.5%. In addition, the range of inflation from 5.5% to 6.5% promotes economic growth in South Africa. Finally, the evidence suggests that inflation volatility does not have a significant impact on economic growth and the focus of policy should be directed towards the level of inflation as has been the case.
- Full Text:
- Date Issued: 2011
Financial integration in East Africa: evidence from interest rate pass-through analysis
- Authors: Bholla, Zohaib Salim
- Date: 2011
- Subjects: East African Community -- Economic integration East African Community -- Economic conditions -- 21st century Interest rates -- Africa, East Interest rates -- Econometric models -- Africa, East Interest rates -- Effect of inflation on -- Africa, East Banks and banking -- Africa, East
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1044 , http://hdl.handle.net/10962/d1006131
- Description: The successful launch of the European Monetary Union (EMU) raised an already ever growing interest in the economics of monetary integration and the formation of monetary unions around the world. Following the EMU experience, countries have considered forming a monetary union amongst themselves. The East African Community (EAC), comprising the three original member countries Kenya, Tanzania and Uganda and now including Burundi and Rwanda, is an example of such a group of countries that seek to form a monetary union. This study aims to identify the current level of financial integration amongst the East African countries. In order to do so the study examines whether the pass-through of monetary policy in the five countries has become similar over time. This is to provide an indication of the extent to which the nominal convergence criteria amongst the member countries have been met. The results of the study provide an indication of whether the formation of a monetary union in East Africa is possible. The empirical analysis used in this study included stationarity tests, four tests of co integration and an asymmetric error correction model to investigate whether the pass-through of monetary policy transmission in the five countries has become more similar over the ten year sample period from 1999 to 2008. The analysis uses three interest rates and 6-year rolling windows to identify the extent of macroeconomic convergence that prevails within the EAC, and consequently whether the formation of a monetary union is possible. The results suggest that the magnitude of the convergence amongst the countries remain low and there are significant rigidities in the deposit and lending rates over time, however the passthrough has improved with respect to the lending rate but not the deposit rate. The overall conclusion of the study suggests that an EAC wide monetary union is currently not possible based on the evidence provided from the pass-through analysis.
- Full Text:
- Date Issued: 2011
- Authors: Bholla, Zohaib Salim
- Date: 2011
- Subjects: East African Community -- Economic integration East African Community -- Economic conditions -- 21st century Interest rates -- Africa, East Interest rates -- Econometric models -- Africa, East Interest rates -- Effect of inflation on -- Africa, East Banks and banking -- Africa, East
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1044 , http://hdl.handle.net/10962/d1006131
- Description: The successful launch of the European Monetary Union (EMU) raised an already ever growing interest in the economics of monetary integration and the formation of monetary unions around the world. Following the EMU experience, countries have considered forming a monetary union amongst themselves. The East African Community (EAC), comprising the three original member countries Kenya, Tanzania and Uganda and now including Burundi and Rwanda, is an example of such a group of countries that seek to form a monetary union. This study aims to identify the current level of financial integration amongst the East African countries. In order to do so the study examines whether the pass-through of monetary policy in the five countries has become similar over time. This is to provide an indication of the extent to which the nominal convergence criteria amongst the member countries have been met. The results of the study provide an indication of whether the formation of a monetary union in East Africa is possible. The empirical analysis used in this study included stationarity tests, four tests of co integration and an asymmetric error correction model to investigate whether the pass-through of monetary policy transmission in the five countries has become more similar over the ten year sample period from 1999 to 2008. The analysis uses three interest rates and 6-year rolling windows to identify the extent of macroeconomic convergence that prevails within the EAC, and consequently whether the formation of a monetary union is possible. The results suggest that the magnitude of the convergence amongst the countries remain low and there are significant rigidities in the deposit and lending rates over time, however the passthrough has improved with respect to the lending rate but not the deposit rate. The overall conclusion of the study suggests that an EAC wide monetary union is currently not possible based on the evidence provided from the pass-through analysis.
- Full Text:
- Date Issued: 2011
Perceptions of Chinese students on the quality of the academic programmes and services offered at Nelson Mandela Metropolitan University
- Authors: Song, Junli
- Date: 2011
- Subjects: Nelson Mandela Metropolitan University -- Curricula -- Chinese students , Chinese students -- Education (Higher) -- South Africa -- Port Elizabeth , Strategic planning , Service industries -- Marketing
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9359 , http://hdl.handle.net/10948/1368 , Nelson Mandela Metropolitan University -- Curricula -- Chinese students , Chinese students -- Education (Higher) -- South Africa -- Port Elizabeth , Strategic planning , Service industries -- Marketing
- Description: With English as the medium of academic exchange, Chinese students are the largest single overseas student group in the English speaking countries (2010). Relative to the outbound education market of other countries, the Chinese education market is large, and it is currently receiving much attention globally. Not only is South Africa one of countries where English is spoken, it has relatively speaking, low study fees and easily-accessed visas compared with countries in Europe and the United States. Therefore, South African universities have a virtually unlimited potential for receiving Chinese students. For South African education providers, particularly NMMU as the host university for the research in question, in order to render the expected education quality and to cater for the Chinese education market effectively, it is of utmost importance that the institutions have a clear understanding of Chinese students’ expectations as well as their actual academic experiences (in the broadest context) when studying at this university. The above is closely linked to the expected educational quality, the actual educational delivery as experienced by Chinese students, as well as the levels of satisfaction they experience as students at NMMU. The purpose of this research project is twofold. Firstly, it aims to construct a theoretical model showing the variables and relationships pertaining to expected and actual educational delivery as experienced by Chinese students. Having assessed the perceptions of the respondents based on the findings, another purpose is to design appropriate educational marketing strategies suitable to address the academic needs and expectations of Chinese students in the broadest context. By designing appropriate education strategies, the potential to develop the Chinese education market in South Africa will be enhanced. Given the purpose and nature of the research in question, methodological triangulation strategies were used. A Likert seven-point scale research instrument was developed and administered. Due to the limited number of respondents (n=61), the Likert scale instrument was further subjected to enrich the data by means of face-to-face interviews with 61 Chinese students (respondents), who shared their perceptions on the expectations and actual experiences of NMMU academic programme quality encounters. By following the methodological triangulation strategies, the validity of the findings is enhanced. The phenomenological dimension of the research was conducted according to guidelines as documented in secondary sources. The findings of the matched pair t-tests indicated that significant statistical differences do exist between the ‘expectations’ and ‘actual experiences’ of Chinese students’ perceived academic programme quality. Sufficient evidence is available at the 95 percent level of significance to support the hypothesis H1, namely: “There are differences between Chinese students’ ‘expected’ and ‘perceived’ academic programme quality (actual experience) of NMMU”. Besides the matched pair t-tests, further statistical analyses were performed by means of calculating Cohen’s ‘d’ values and relative percentage ratings to assess the magnitude of the “gap” between expectations and actual experiences of Chinese students studying at NMMU. The findings revealed that the Chinese students were not completely satisfied with their actual experiences when studying at NMMU. The above statistical findings were endorsed by the qualitative findings. Three sets of conclusions and recommendations were identified for this research. Firstly, conclusions emanating from secondary sources on service quality and students’ satisfaction literature were provided, such that students satisfaction is seen more as a psychological state which reveals an overall feeling of the students’ purchase and consumption experience. Secondly, the conclusions linked to the empirical findings revealed significant statistical differences between the expectations and perceptions (actual experiences) of Chinese students’ perceived academic programme quality. Finally, recommendations on relevant NMMU educational marketing objectives/ strategies can be grouped into four domains: - To build a customer-led education business which adheres to the principles of true marketing orientation with the focus on Chinese students. To achieve this objective a high level of understanding of Chinese students’ specific needs and wants when studying at NMMU is of utmost importance. The effective marketing positioning of NMMU can render leverage benefits to themselves and their clientele. - Findings from the biographic data analyses are significant to the positioning strategies and market segmentation strategies of NMMU. - The decision on a proper positioning strategy entails the choice of target market segments, which will determine where and how the education business competes and its choice of differential advantages. - The South African education providers should have appropriate educational brands to entice the Chinese students’ support.
- Full Text:
- Date Issued: 2011
- Authors: Song, Junli
- Date: 2011
- Subjects: Nelson Mandela Metropolitan University -- Curricula -- Chinese students , Chinese students -- Education (Higher) -- South Africa -- Port Elizabeth , Strategic planning , Service industries -- Marketing
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9359 , http://hdl.handle.net/10948/1368 , Nelson Mandela Metropolitan University -- Curricula -- Chinese students , Chinese students -- Education (Higher) -- South Africa -- Port Elizabeth , Strategic planning , Service industries -- Marketing
- Description: With English as the medium of academic exchange, Chinese students are the largest single overseas student group in the English speaking countries (2010). Relative to the outbound education market of other countries, the Chinese education market is large, and it is currently receiving much attention globally. Not only is South Africa one of countries where English is spoken, it has relatively speaking, low study fees and easily-accessed visas compared with countries in Europe and the United States. Therefore, South African universities have a virtually unlimited potential for receiving Chinese students. For South African education providers, particularly NMMU as the host university for the research in question, in order to render the expected education quality and to cater for the Chinese education market effectively, it is of utmost importance that the institutions have a clear understanding of Chinese students’ expectations as well as their actual academic experiences (in the broadest context) when studying at this university. The above is closely linked to the expected educational quality, the actual educational delivery as experienced by Chinese students, as well as the levels of satisfaction they experience as students at NMMU. The purpose of this research project is twofold. Firstly, it aims to construct a theoretical model showing the variables and relationships pertaining to expected and actual educational delivery as experienced by Chinese students. Having assessed the perceptions of the respondents based on the findings, another purpose is to design appropriate educational marketing strategies suitable to address the academic needs and expectations of Chinese students in the broadest context. By designing appropriate education strategies, the potential to develop the Chinese education market in South Africa will be enhanced. Given the purpose and nature of the research in question, methodological triangulation strategies were used. A Likert seven-point scale research instrument was developed and administered. Due to the limited number of respondents (n=61), the Likert scale instrument was further subjected to enrich the data by means of face-to-face interviews with 61 Chinese students (respondents), who shared their perceptions on the expectations and actual experiences of NMMU academic programme quality encounters. By following the methodological triangulation strategies, the validity of the findings is enhanced. The phenomenological dimension of the research was conducted according to guidelines as documented in secondary sources. The findings of the matched pair t-tests indicated that significant statistical differences do exist between the ‘expectations’ and ‘actual experiences’ of Chinese students’ perceived academic programme quality. Sufficient evidence is available at the 95 percent level of significance to support the hypothesis H1, namely: “There are differences between Chinese students’ ‘expected’ and ‘perceived’ academic programme quality (actual experience) of NMMU”. Besides the matched pair t-tests, further statistical analyses were performed by means of calculating Cohen’s ‘d’ values and relative percentage ratings to assess the magnitude of the “gap” between expectations and actual experiences of Chinese students studying at NMMU. The findings revealed that the Chinese students were not completely satisfied with their actual experiences when studying at NMMU. The above statistical findings were endorsed by the qualitative findings. Three sets of conclusions and recommendations were identified for this research. Firstly, conclusions emanating from secondary sources on service quality and students’ satisfaction literature were provided, such that students satisfaction is seen more as a psychological state which reveals an overall feeling of the students’ purchase and consumption experience. Secondly, the conclusions linked to the empirical findings revealed significant statistical differences between the expectations and perceptions (actual experiences) of Chinese students’ perceived academic programme quality. Finally, recommendations on relevant NMMU educational marketing objectives/ strategies can be grouped into four domains: - To build a customer-led education business which adheres to the principles of true marketing orientation with the focus on Chinese students. To achieve this objective a high level of understanding of Chinese students’ specific needs and wants when studying at NMMU is of utmost importance. The effective marketing positioning of NMMU can render leverage benefits to themselves and their clientele. - Findings from the biographic data analyses are significant to the positioning strategies and market segmentation strategies of NMMU. - The decision on a proper positioning strategy entails the choice of target market segments, which will determine where and how the education business competes and its choice of differential advantages. - The South African education providers should have appropriate educational brands to entice the Chinese students’ support.
- Full Text:
- Date Issued: 2011
Exchange rate pass-through to domestic prices in Kenya
- Authors: Mnjama, Gladys Susan
- Date: 2011
- Subjects: Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:975 , http://hdl.handle.net/10962/d1002709 , Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Description: In 1993, Kenya liberalised its trade policy and allowed the Kenyan Shillings to freely float. This openness has left Kenya's domestic prices vulnerable to the effects of exchange rate fluctuations. One of the objectives of the Central Bank of Kenya is to maintain inflation levels at sustainable levels. Thus it has become necessary to determine the influence that exchange rate changes have on domestic prices given that one of the major determinants of inflation is exchange rate movements. For this reason, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to domestic prices in Kenya. In addition, it takes into account the direction and size of changes in the exchange rates to determine whether the exchange rate fluctuations are symmetric or asymmetric. The thesis uses quarterly data ranging from 1993:Ql - 2008:Q4 as it takes into account the period when the process of liberalization occurred. The empirical estimation was done in two stages. The first stage was estimated using the Johansen (1991) and (1995) co integration techniques and a vector error correction model (VECM). The second stage entailed estimating the impulse response and variance decomposition functions as well as conducting block exogeneity Wald tests. In determining the asymmetric aspect of the analysis, the study followed Pollard and Coughlin (2004) and Webber (2000) frameworks in analysing asymmetry with respect to appreciation and depreciation and large and small changes in the exchange rate to import prices. The results obtained showed that ERPT to Kenya is incomplete but relatively low at about 36 percent in the long run. In terms of asymmetry, the results showed that ERPT is found to be higher in periods of appreciation than depreciation. This is in support of market share and binding quantity constraints theory. In relation to size changes, the results show that size changes have no significant impact on ERPT in Kenya.
- Full Text:
- Date Issued: 2011
- Authors: Mnjama, Gladys Susan
- Date: 2011
- Subjects: Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:975 , http://hdl.handle.net/10962/d1002709 , Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Description: In 1993, Kenya liberalised its trade policy and allowed the Kenyan Shillings to freely float. This openness has left Kenya's domestic prices vulnerable to the effects of exchange rate fluctuations. One of the objectives of the Central Bank of Kenya is to maintain inflation levels at sustainable levels. Thus it has become necessary to determine the influence that exchange rate changes have on domestic prices given that one of the major determinants of inflation is exchange rate movements. For this reason, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to domestic prices in Kenya. In addition, it takes into account the direction and size of changes in the exchange rates to determine whether the exchange rate fluctuations are symmetric or asymmetric. The thesis uses quarterly data ranging from 1993:Ql - 2008:Q4 as it takes into account the period when the process of liberalization occurred. The empirical estimation was done in two stages. The first stage was estimated using the Johansen (1991) and (1995) co integration techniques and a vector error correction model (VECM). The second stage entailed estimating the impulse response and variance decomposition functions as well as conducting block exogeneity Wald tests. In determining the asymmetric aspect of the analysis, the study followed Pollard and Coughlin (2004) and Webber (2000) frameworks in analysing asymmetry with respect to appreciation and depreciation and large and small changes in the exchange rate to import prices. The results obtained showed that ERPT to Kenya is incomplete but relatively low at about 36 percent in the long run. In terms of asymmetry, the results showed that ERPT is found to be higher in periods of appreciation than depreciation. This is in support of market share and binding quantity constraints theory. In relation to size changes, the results show that size changes have no significant impact on ERPT in Kenya.
- Full Text:
- Date Issued: 2011
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:
- Date Issued: 2011
- 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:
- Date Issued: 2011
An analysis of the long run comovements between financial system development and mining production in South Africa
- Authors: Ajagbe, Stephen Mayowa
- Date: 2011
- Subjects: Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:955 , http://hdl.handle.net/10962/d1002689 , Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Description: This study examines the nature of the relationship which exists between mining sector production and development of the financial systems in South Africa. This is particularly important in that the mining sector is considered to be one of the major contributors to the country’s overall economic growth. South Africa is also considered to have a very well developed financial system, to the point where the dominance of one over the other is difficult to identify. Therefore offering insight into the nature of this relationship will assist policy makers in identifying the most effective policies in order to ensure that the developments within the financial systems impact appropriately on the mining sector, and ultimately on the economy. In addition to using the conventional proxies of financial system development, this study utilises the principal component analysis (PCA) to construct an index for the entire financial system. The multivariate cointegration approach as proposed by Johansen (1988) and Johansen and Juselius (1990) was then used to estimate the relationship between the development of the financial systems and the mining sector production for the period 1988-2008. The study reveals mixed results for different measures of financial system development. Those involving the banking system show that a negative relationship exists between total mining production and total credit extended to the private sector, while liquid liabilities has a positive relationship. Similarly, with the stock market system, mixed results are also obtained which reveal a negative relationship between total mining production and stock market capitalisation, while a positive relationship is found with secondary market turnover. Of all the financial system variables, only that of stock market capitalisation was found to be significant. The result with the financial development index reveals that a significant negative relationship exists between financial system development and total mining sector production. Results on the other variables controlled in the estimation show that positive and significant relationships exist between total mining production and both nominal exchange rate and political stability respectively. Increased mining production therefore takes place in periods of appreciating exchange rates, and similarly in the post-apartheid era. On the other hand, negative relationships were found for both trade openness and inflation control variables. The impulse response and variance decomposition analyses showed that total mining production explains the largest amount of shocks within itself. Overall, the study reveals that the mining sector might not have benefited much from the development in the South African financial system.
- Full Text:
- Date Issued: 2011
- Authors: Ajagbe, Stephen Mayowa
- Date: 2011
- Subjects: Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:955 , http://hdl.handle.net/10962/d1002689 , Economic development -- South Africa , Econometric models , Mineral industries -- Economic aspects -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Principal components analysis , Cointegration , Stock exchanges -- South Africa , Banks and banking -- South Africa , Foreign exchange rates
- Description: This study examines the nature of the relationship which exists between mining sector production and development of the financial systems in South Africa. This is particularly important in that the mining sector is considered to be one of the major contributors to the country’s overall economic growth. South Africa is also considered to have a very well developed financial system, to the point where the dominance of one over the other is difficult to identify. Therefore offering insight into the nature of this relationship will assist policy makers in identifying the most effective policies in order to ensure that the developments within the financial systems impact appropriately on the mining sector, and ultimately on the economy. In addition to using the conventional proxies of financial system development, this study utilises the principal component analysis (PCA) to construct an index for the entire financial system. The multivariate cointegration approach as proposed by Johansen (1988) and Johansen and Juselius (1990) was then used to estimate the relationship between the development of the financial systems and the mining sector production for the period 1988-2008. The study reveals mixed results for different measures of financial system development. Those involving the banking system show that a negative relationship exists between total mining production and total credit extended to the private sector, while liquid liabilities has a positive relationship. Similarly, with the stock market system, mixed results are also obtained which reveal a negative relationship between total mining production and stock market capitalisation, while a positive relationship is found with secondary market turnover. Of all the financial system variables, only that of stock market capitalisation was found to be significant. The result with the financial development index reveals that a significant negative relationship exists between financial system development and total mining sector production. Results on the other variables controlled in the estimation show that positive and significant relationships exist between total mining production and both nominal exchange rate and political stability respectively. Increased mining production therefore takes place in periods of appreciating exchange rates, and similarly in the post-apartheid era. On the other hand, negative relationships were found for both trade openness and inflation control variables. The impulse response and variance decomposition analyses showed that total mining production explains the largest amount of shocks within itself. Overall, the study reveals that the mining sector might not have benefited much from the development in the South African financial system.
- Full Text:
- Date Issued: 2011
A critical analysis of the tax implications for small and micro businesses
- Authors: Mkhize, Vukani
- Date: 2011
- Subjects: Small business -- Taxation -- Law and legislation , Taxation -- Law and legislation
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8953 , http://hdl.handle.net/10948/1338 , Small business -- Taxation -- Law and legislation , Taxation -- Law and legislation
- Description: The South African economy has seen an increase in small businesses since 1994. This increase has been caused by an increase in unemployment rate and government interventions to promote small businesses. The government has through the National Treasury introduced various tax legislations to simplify and facilitate the tax processes that small businesses have to comply with. The discussion contained in this treatise seeks to critically analyse the tax implications for small and micro businesses. One of the small business tax legislations, Small Business Corporations, is discussed in chapter 2. The Small Business Corporation legislation provides for two key concessions to qualifying small businesses. The first concession is the progressive tax rates that are lower than normal tax rates at taxable income level below R300 000. The second concession is the special capital allowances that the qualifying small business is entitled to. The tax amnesty for small businesses was introduced in July 2006 to provide an opportunity to small businesses which were not up to date with their tax affairs, to regularise their tax affairs. Small businesses had to meet certain requirements and pay an amnesty levy ranging from 2 to 5 percent of their taxable income. The tax amnesty on small businesses was not as effective as intended, however a slight increase in the South African taxpayer base was achieved. The voluntary disclosure programme has recently been introduced in November 2010, to provide an opportunity for all businesses to voluntarily disclose their previous defaults without being subjected to criminal prosecution and penalties. The government further attempted to simplify the tax compliance process by introducing turnover tax legislation. The turnover tax provides for a single tax system that does away with the need to account for normal tax, capital gains tax, secondary tax on companies and value added tax. The turnover tax system is optional to qualifying small businesses. The turnover tax is calculated by simply applying a tax rate to taxable turnover. Small businesses need carefully consider whether turnover tax will be beneficial to them. It is not advisable for small businesses that are making losses to adopt turnover tax. Another small business tax legislation that promises to be effective is the venture capital incentive. This legislation provides for deduction of expenditure actually incurred in the acquisition of shares by qualifying businesses. It appears that, given the challenges that small businesses still face, the government still has a lot more to do to simplify the tax process for small businesses.
- Full Text:
- Date Issued: 2011
- Authors: Mkhize, Vukani
- Date: 2011
- Subjects: Small business -- Taxation -- Law and legislation , Taxation -- Law and legislation
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8953 , http://hdl.handle.net/10948/1338 , Small business -- Taxation -- Law and legislation , Taxation -- Law and legislation
- Description: The South African economy has seen an increase in small businesses since 1994. This increase has been caused by an increase in unemployment rate and government interventions to promote small businesses. The government has through the National Treasury introduced various tax legislations to simplify and facilitate the tax processes that small businesses have to comply with. The discussion contained in this treatise seeks to critically analyse the tax implications for small and micro businesses. One of the small business tax legislations, Small Business Corporations, is discussed in chapter 2. The Small Business Corporation legislation provides for two key concessions to qualifying small businesses. The first concession is the progressive tax rates that are lower than normal tax rates at taxable income level below R300 000. The second concession is the special capital allowances that the qualifying small business is entitled to. The tax amnesty for small businesses was introduced in July 2006 to provide an opportunity to small businesses which were not up to date with their tax affairs, to regularise their tax affairs. Small businesses had to meet certain requirements and pay an amnesty levy ranging from 2 to 5 percent of their taxable income. The tax amnesty on small businesses was not as effective as intended, however a slight increase in the South African taxpayer base was achieved. The voluntary disclosure programme has recently been introduced in November 2010, to provide an opportunity for all businesses to voluntarily disclose their previous defaults without being subjected to criminal prosecution and penalties. The government further attempted to simplify the tax compliance process by introducing turnover tax legislation. The turnover tax provides for a single tax system that does away with the need to account for normal tax, capital gains tax, secondary tax on companies and value added tax. The turnover tax system is optional to qualifying small businesses. The turnover tax is calculated by simply applying a tax rate to taxable turnover. Small businesses need carefully consider whether turnover tax will be beneficial to them. It is not advisable for small businesses that are making losses to adopt turnover tax. Another small business tax legislation that promises to be effective is the venture capital incentive. This legislation provides for deduction of expenditure actually incurred in the acquisition of shares by qualifying businesses. It appears that, given the challenges that small businesses still face, the government still has a lot more to do to simplify the tax process for small businesses.
- Full Text:
- Date Issued: 2011
Bayesian logistic regression models for credit scoring
- Authors: Webster, Gregg
- Date: 2011
- Subjects: Bayesian statistical decision theory Credit scoring systems Regression analysis Logistic regression analysis Monte Carlo method Markov processes Financial institutions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:5574 , http://hdl.handle.net/10962/d1005538
- Description: The Bayesian approach to logistic regression modelling for credit scoring is useful when there are data quantity issues. Data quantity issues might occur when a bank is opening in a new location or there is change in the scoring procedure. Making use of prior information (available from the coefficients estimated on other data sets, or expert knowledge about the coefficients) a Bayesian approach is proposed to improve the credit scoring models. To achieve this, a data set is split into two sets, “old” data and “new” data. Priors are obtained from a model fitted on the “old” data. This model is assumed to be a scoring model used by a financial institution in the current location. The financial institution is then assumed to expand into a new economic location where there is limited data. The priors from the model on the “old” data are then combined in a Bayesian model with the “new” data to obtain a model which represents all the available information. The predictive performance of this Bayesian model is compared to a model which does not make use of any prior information. It is found that the use of relevant prior information improves the predictive performance when the size of the “new” data is small. As the size of the “new” data increases, the importance of including prior information decreases
- Full Text:
- Date Issued: 2011
- Authors: Webster, Gregg
- Date: 2011
- Subjects: Bayesian statistical decision theory Credit scoring systems Regression analysis Logistic regression analysis Monte Carlo method Markov processes Financial institutions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:5574 , http://hdl.handle.net/10962/d1005538
- Description: The Bayesian approach to logistic regression modelling for credit scoring is useful when there are data quantity issues. Data quantity issues might occur when a bank is opening in a new location or there is change in the scoring procedure. Making use of prior information (available from the coefficients estimated on other data sets, or expert knowledge about the coefficients) a Bayesian approach is proposed to improve the credit scoring models. To achieve this, a data set is split into two sets, “old” data and “new” data. Priors are obtained from a model fitted on the “old” data. This model is assumed to be a scoring model used by a financial institution in the current location. The financial institution is then assumed to expand into a new economic location where there is limited data. The priors from the model on the “old” data are then combined in a Bayesian model with the “new” data to obtain a model which represents all the available information. The predictive performance of this Bayesian model is compared to a model which does not make use of any prior information. It is found that the use of relevant prior information improves the predictive performance when the size of the “new” data is small. As the size of the “new” data increases, the importance of including prior information decreases
- Full Text:
- Date Issued: 2011
South African money market volatility, asymmetry and retail interest pass-through
- Authors: Fadiran, Gideon Oluwatobi
- Date: 2011
- Subjects: Money market -- South Africa Interest rates -- South Africa Monetary policy -- South Africa Econometric models Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:993 , http://hdl.handle.net/10962/d1002728
- Description: The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.
- Full Text:
- Date Issued: 2011
- Authors: Fadiran, Gideon Oluwatobi
- Date: 2011
- Subjects: Money market -- South Africa Interest rates -- South Africa Monetary policy -- South Africa Econometric models Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:993 , http://hdl.handle.net/10962/d1002728
- Description: The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.
- Full Text:
- Date Issued: 2011
Volatility transmission across South African financial markets: does the bull – bear distinction matter?
- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
- Full Text:
- Date Issued: 2011
- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
- Full Text:
- Date Issued: 2011
Identifying the interdependence between South Africa's monetary policy and the stock market
- Authors: Muroyiwa, Brian
- Date: 2011
- Subjects: Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:982 , http://hdl.handle.net/10962/d1002716 , Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Description: This study estimates the interdependence between South Africa‟s monetary policy and stock market performance, utilising structural vector autoregression (SVAR) methodology. The study finds that a stock price shock which decrease stock prices by 100 basis points leads to 5 basis points decrease in interbank rate. A monetary policy shock that increases the interbank rate by l percent leads to decrease in real stock prices by 1 percent. This result for South Africa is similar to the result by Bjornland and Leteimo (2009) which earlier concluded that there was a high interdependence between interest rate setting and stock prices. However the magnitude of the relationship is relatively lower for South Africa compared to that of the United States of America (USA). The result of the current study is also very much consistent with the argument that the South African stock market is resource-based and so is influenced by external shocks, meaning monetary policy shock does not have as much impact on stock market in South Africa as in the USA. However the SARB may have to consider watching movements in stock prices so that booms in stock markets do not defeat central bank monetary policy thrusts. The stock price market is an essential source of information for monetary policy in South Africa.
- Full Text:
- Date Issued: 2011
- Authors: Muroyiwa, Brian
- Date: 2011
- Subjects: Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:982 , http://hdl.handle.net/10962/d1002716 , Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Description: This study estimates the interdependence between South Africa‟s monetary policy and stock market performance, utilising structural vector autoregression (SVAR) methodology. The study finds that a stock price shock which decrease stock prices by 100 basis points leads to 5 basis points decrease in interbank rate. A monetary policy shock that increases the interbank rate by l percent leads to decrease in real stock prices by 1 percent. This result for South Africa is similar to the result by Bjornland and Leteimo (2009) which earlier concluded that there was a high interdependence between interest rate setting and stock prices. However the magnitude of the relationship is relatively lower for South Africa compared to that of the United States of America (USA). The result of the current study is also very much consistent with the argument that the South African stock market is resource-based and so is influenced by external shocks, meaning monetary policy shock does not have as much impact on stock market in South Africa as in the USA. However the SARB may have to consider watching movements in stock prices so that booms in stock markets do not defeat central bank monetary policy thrusts. The stock price market is an essential source of information for monetary policy in South Africa.
- Full Text:
- Date Issued: 2011
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:
- Date Issued: 2011
- 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:
- Date Issued: 2011
Cointegration, causality and international portfolio diversification : investigating potential benefits to a South African investor
- Authors: Msimanga, Nkululeko Lwazi
- Date: 2011
- Subjects: Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:962 , http://hdl.handle.net/10962/d1002696 , Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Description: Research studies on portfolio diversification have tended to focus on developed markets and paid less attention to emerging markets. Traditionally, correlation analysis has been used to determine potential benefits from diversification but current studies have shifted focus from correlation analysis to exploring cointegration analysis and other forms of tests such as the Vector Error Correction Methodology. The research seeks to find if it is beneficial for a South African investor to diversify their portfolio of emerging market equities over a long-term period. Daily weighted share indices for the period of January 1996 to November 2008 were collected and analysed through the application of the Johansen cointegration technique and Vector Error Correction Methodology. Granger Causality tests were also performed to established whether one variable can be useful in forecasting another variable. The study found that there was at least one statistically significant long-run relationship between the emerging markets. After testing for unit roots for all the share indices and their first difference using the Augmented Dickey-Fuller test (ADF), Philips-Perron and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests, similar conclusions were m~de. All the unit root tests and their levels could not be rejected for all the series. However, unit root tests on the first differences were rejected, meaning that all series are of order 1(1) - evidence of cointegration. Simply put, emerging markets tend not to drift apart over time. This suggests that emerging markets offer limited benefits to investors who are looking to add some risk to their portfolios. In addition, the study also found evidence of both unidirectional and bidirectional causality (Granger-Cause tests) between markets. This implies that the conditions for a particular market are exogenous of the other market. The study concludes that emerging markets are gradually adopting the same profile as developed markets.
- Full Text:
- Date Issued: 2011
- Authors: Msimanga, Nkululeko Lwazi
- Date: 2011
- Subjects: Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:962 , http://hdl.handle.net/10962/d1002696 , Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Description: Research studies on portfolio diversification have tended to focus on developed markets and paid less attention to emerging markets. Traditionally, correlation analysis has been used to determine potential benefits from diversification but current studies have shifted focus from correlation analysis to exploring cointegration analysis and other forms of tests such as the Vector Error Correction Methodology. The research seeks to find if it is beneficial for a South African investor to diversify their portfolio of emerging market equities over a long-term period. Daily weighted share indices for the period of January 1996 to November 2008 were collected and analysed through the application of the Johansen cointegration technique and Vector Error Correction Methodology. Granger Causality tests were also performed to established whether one variable can be useful in forecasting another variable. The study found that there was at least one statistically significant long-run relationship between the emerging markets. After testing for unit roots for all the share indices and their first difference using the Augmented Dickey-Fuller test (ADF), Philips-Perron and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests, similar conclusions were m~de. All the unit root tests and their levels could not be rejected for all the series. However, unit root tests on the first differences were rejected, meaning that all series are of order 1(1) - evidence of cointegration. Simply put, emerging markets tend not to drift apart over time. This suggests that emerging markets offer limited benefits to investors who are looking to add some risk to their portfolios. In addition, the study also found evidence of both unidirectional and bidirectional causality (Granger-Cause tests) between markets. This implies that the conditions for a particular market are exogenous of the other market. The study concludes that emerging markets are gradually adopting the same profile as developed markets.
- Full Text:
- Date Issued: 2011
Analysis of volatility spillover effects between the South African, regional and world equity markets
- Authors: Mumba, Mabvuto
- Date: 2011
- Subjects: Financial crises International finance Stocks -- Prices -- Africa Stocks -- Prices -- South Africa Capital market -- Africa Capital market -- South Africa Foreign exchange rates Africa -- Economic conditions South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:957 , http://hdl.handle.net/10962/d1002691
- Description: The current study examines the extent and magnitude by which global and regional shocks are transmitted to the volatility of returns in the stock markets of South Africa, Egypt, Nigeria, Botswana, Mauritius and Egypt. This is done so as to make inferences on the level of the domestic market‟s integration into the regional and world capital markets. By applying multivariate and univariate GARCH models, using weekly data from June 1995 to May 2010, the main empirical findings are threefold. Firstly, the volatility analytical framework finds statistically significant and time-varying volatility spillover effects from the regional and global markets to the South African market. Global shocks are generally stronger and account for up to 23.9 percent of the volatility of South Africa‟s equity market compared to weaker regional factors which account for less than 1 percent of domestic variance. Only in countries with strong bilateral trade and economic links with South Africa, such as Botswana and Namibia, is it found that regional factors are more dominant than global factors for domestic volatility. Compared to the other African markets, the joint influence of foreign shocks on domestic volatility is highest in South Africa and Egypt, two of Africa‟s largest and most developed markets. The results further demonstrate that for all the African markets the explanatory power of both regional and global factors for domestic volatility is not constant over time and tends to increase during turbulent market periods. Secondly, the analysis of the determinants of South frica‟s second moment linkages with the global market suggests that the volatility of the exchange rate plays a cardinal role in influencing the magnitude by which global shocks affect domestic volatility. The increased global integration in the second moments cannot be attributed to either increased trade integration, convergence in inflation rates or to convergence in interest rates between South Africa and the global markets. Lastly, tests were conducted to examine whether there have been contagion effects from the regional and global markets to South Africa from the 1997 Asian crisis and the 2007/8 global financial crisis. The results show no evidence of contagion during either the East Asian currency crisis or the recent global financial crisis to South Africa, while some African markets, such as Egypt, Mauritius and Botswana, exhibit contagion effects from either crisis. Overall, the empirical findings generally support the view that African markets are segmented both at the regional and global levels as domestic volatility is more influenced by local idiosyncratic shocks (the proportion not attributable to either global and regional factors). However, the volatility of South Africa, and to a lesser extent Egypt, remains relatively more open to global influence. This implies that the potential for gains from international portfolio diversification and the scope for success of policies aimed at the stabilisation of equity markets in these markets exist.
- Full Text:
- Date Issued: 2011
- Authors: Mumba, Mabvuto
- Date: 2011
- Subjects: Financial crises International finance Stocks -- Prices -- Africa Stocks -- Prices -- South Africa Capital market -- Africa Capital market -- South Africa Foreign exchange rates Africa -- Economic conditions South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:957 , http://hdl.handle.net/10962/d1002691
- Description: The current study examines the extent and magnitude by which global and regional shocks are transmitted to the volatility of returns in the stock markets of South Africa, Egypt, Nigeria, Botswana, Mauritius and Egypt. This is done so as to make inferences on the level of the domestic market‟s integration into the regional and world capital markets. By applying multivariate and univariate GARCH models, using weekly data from June 1995 to May 2010, the main empirical findings are threefold. Firstly, the volatility analytical framework finds statistically significant and time-varying volatility spillover effects from the regional and global markets to the South African market. Global shocks are generally stronger and account for up to 23.9 percent of the volatility of South Africa‟s equity market compared to weaker regional factors which account for less than 1 percent of domestic variance. Only in countries with strong bilateral trade and economic links with South Africa, such as Botswana and Namibia, is it found that regional factors are more dominant than global factors for domestic volatility. Compared to the other African markets, the joint influence of foreign shocks on domestic volatility is highest in South Africa and Egypt, two of Africa‟s largest and most developed markets. The results further demonstrate that for all the African markets the explanatory power of both regional and global factors for domestic volatility is not constant over time and tends to increase during turbulent market periods. Secondly, the analysis of the determinants of South frica‟s second moment linkages with the global market suggests that the volatility of the exchange rate plays a cardinal role in influencing the magnitude by which global shocks affect domestic volatility. The increased global integration in the second moments cannot be attributed to either increased trade integration, convergence in inflation rates or to convergence in interest rates between South Africa and the global markets. Lastly, tests were conducted to examine whether there have been contagion effects from the regional and global markets to South Africa from the 1997 Asian crisis and the 2007/8 global financial crisis. The results show no evidence of contagion during either the East Asian currency crisis or the recent global financial crisis to South Africa, while some African markets, such as Egypt, Mauritius and Botswana, exhibit contagion effects from either crisis. Overall, the empirical findings generally support the view that African markets are segmented both at the regional and global levels as domestic volatility is more influenced by local idiosyncratic shocks (the proportion not attributable to either global and regional factors). However, the volatility of South Africa, and to a lesser extent Egypt, remains relatively more open to global influence. This implies that the potential for gains from international portfolio diversification and the scope for success of policies aimed at the stabilisation of equity markets in these markets exist.
- Full Text:
- Date Issued: 2011
A conjoint choice experiment analysing water service delivery in three Eastern Cape Municipalities
- Authors: Hosking, Phillipa
- Date: 2011
- Subjects: Municipal service -- South Africa -- Eastern Cape -- Marketing , Water Supply -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9357 , http://hdl.handle.net/10948/1378 , Municipal service -- South Africa -- Eastern Cape -- Marketing , Water Supply -- South Africa -- Eastern Cape
- Description: This study considers the nature of South African municipal water service delivery, and how marketing strategies can provide a framework for better management of this service. It reflects on the elements that guide municipal decision making and evaluates user preferences for levels of the municipal “water service mix” by employing conjoint analysis. Particular attention is paid to consumer willingness to pay for improvements in the “water service mix”. The study argues that the values municipal consumers attach to the variables of the water service mix need to be better incorporated into decision making regarding water service delivery, and that conjoint analysis is an informative method to assist in generating this information. The study outlines a water service marketing challenge and methods of research followed to deal with it (Chapter One) and the nature of the laws and institutions governing water service provision in South Africa (Chapter Two). The task of providing water services is delegated to Water Service Providers (municipalities). The key variables of the water service mix from the consumers perspective include; quality of the water, rate of flow from tap, interruption of water flow, sewerage disposal, assurance of supply, and water service tariffs (Chapter Three). The study covers the areas of Amathole, Kouga and Nelson Mandela Bay Municipalities' (Chapter Five). The method of marketing analysis applied is conjoint analysis, alternatively known as choice experiment analysis. An overview of the method is provided and its application to three samples of one hundred residents at each of the study sites is described in Chapter Four. The responses of the three hundred residents provide the basis for the results. Respondents were requested to make a series of choices between alternative water service mixes consisting of six variables differentiated by three levels (Chapter Three). In making these choices they implicitly compared and weighed up the relative worth of the selected variables against each other. The findings of the analysis were diverse (Chapter Six); two of the three estimated models did not yield significant results. An interpretation of these results showed that the respondents of the Kouga municipality were willing to pay R65.05 more (per 10 xii Kilolitres of water) than their current monthly tariff for a marginal improvement in water quality, R57.29 more (per 10 Kilolitres of water) per month for a marginal improvement in sewerage disposal and R21.90 (per 10 Kilolitres) per month for marginal improvements in assurance of water supply. Findings showed that willingness to pay for reduced interruptions and improved flow rates was lower and not as highly valued as the abovementioned variables. Most of these findings were consistent with similar international and national studies showing their reliability. Although there has been significant improvement in extending the reach of the network since 1994, the standards of water service provision in South African municipalities do not appear to have improved. The results of this study mirror a number of concerns that have been expressed about the standards of service, particularly sanitation (in publications like the Green Drop Report). Municipal service delivery in these areas would appear to be constrained by a number of issues including a lack of public involvement, legislation, limited financial resources and institutional capabilities. However, it is a service that is too vitally important to be allowed to deteriorate. Marketing analyses can make a valuable contribution to allocating and managing the scarce resources to best satisfy the consumers of water services (Chapter Seven). When consumer orientation is formally introduced as the main objective into the thinking of the service provider, it becomes untenable to offer poor service delivery. But that is exactly what many municipalities appear to be doing. There is a need to get back to the basics – where the consumer is king. This analysis concludes that consumers want, above all else, assurance of water supply, a high quality of water, and safe environmentally sensitive disposal of waste water. It is recommended that municipalities not lose sight of the fact that price is an important part of the marketing mix. From the paying consumers perspective, when the government incorporate too many other considerations into pricing of water services they are, in effect, disengaging price from the marketing mix by not being sensitive to consumer needs. This approach shows a weak marketing strategy, and may result in dissatisfied consumers who may become unwilling to pay for their water services – an outcome that the researcher would discourage.
- Full Text:
- Date Issued: 2011
- Authors: Hosking, Phillipa
- Date: 2011
- Subjects: Municipal service -- South Africa -- Eastern Cape -- Marketing , Water Supply -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9357 , http://hdl.handle.net/10948/1378 , Municipal service -- South Africa -- Eastern Cape -- Marketing , Water Supply -- South Africa -- Eastern Cape
- Description: This study considers the nature of South African municipal water service delivery, and how marketing strategies can provide a framework for better management of this service. It reflects on the elements that guide municipal decision making and evaluates user preferences for levels of the municipal “water service mix” by employing conjoint analysis. Particular attention is paid to consumer willingness to pay for improvements in the “water service mix”. The study argues that the values municipal consumers attach to the variables of the water service mix need to be better incorporated into decision making regarding water service delivery, and that conjoint analysis is an informative method to assist in generating this information. The study outlines a water service marketing challenge and methods of research followed to deal with it (Chapter One) and the nature of the laws and institutions governing water service provision in South Africa (Chapter Two). The task of providing water services is delegated to Water Service Providers (municipalities). The key variables of the water service mix from the consumers perspective include; quality of the water, rate of flow from tap, interruption of water flow, sewerage disposal, assurance of supply, and water service tariffs (Chapter Three). The study covers the areas of Amathole, Kouga and Nelson Mandela Bay Municipalities' (Chapter Five). The method of marketing analysis applied is conjoint analysis, alternatively known as choice experiment analysis. An overview of the method is provided and its application to three samples of one hundred residents at each of the study sites is described in Chapter Four. The responses of the three hundred residents provide the basis for the results. Respondents were requested to make a series of choices between alternative water service mixes consisting of six variables differentiated by three levels (Chapter Three). In making these choices they implicitly compared and weighed up the relative worth of the selected variables against each other. The findings of the analysis were diverse (Chapter Six); two of the three estimated models did not yield significant results. An interpretation of these results showed that the respondents of the Kouga municipality were willing to pay R65.05 more (per 10 xii Kilolitres of water) than their current monthly tariff for a marginal improvement in water quality, R57.29 more (per 10 Kilolitres of water) per month for a marginal improvement in sewerage disposal and R21.90 (per 10 Kilolitres) per month for marginal improvements in assurance of water supply. Findings showed that willingness to pay for reduced interruptions and improved flow rates was lower and not as highly valued as the abovementioned variables. Most of these findings were consistent with similar international and national studies showing their reliability. Although there has been significant improvement in extending the reach of the network since 1994, the standards of water service provision in South African municipalities do not appear to have improved. The results of this study mirror a number of concerns that have been expressed about the standards of service, particularly sanitation (in publications like the Green Drop Report). Municipal service delivery in these areas would appear to be constrained by a number of issues including a lack of public involvement, legislation, limited financial resources and institutional capabilities. However, it is a service that is too vitally important to be allowed to deteriorate. Marketing analyses can make a valuable contribution to allocating and managing the scarce resources to best satisfy the consumers of water services (Chapter Seven). When consumer orientation is formally introduced as the main objective into the thinking of the service provider, it becomes untenable to offer poor service delivery. But that is exactly what many municipalities appear to be doing. There is a need to get back to the basics – where the consumer is king. This analysis concludes that consumers want, above all else, assurance of water supply, a high quality of water, and safe environmentally sensitive disposal of waste water. It is recommended that municipalities not lose sight of the fact that price is an important part of the marketing mix. From the paying consumers perspective, when the government incorporate too many other considerations into pricing of water services they are, in effect, disengaging price from the marketing mix by not being sensitive to consumer needs. This approach shows a weak marketing strategy, and may result in dissatisfied consumers who may become unwilling to pay for their water services – an outcome that the researcher would discourage.
- Full Text:
- Date Issued: 2011
Monetary policy transmission in South Africa: a comparative analysis of credit and exchange rate channels
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
- Full Text:
- Date Issued: 2011
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
- Full Text:
- Date Issued: 2011
The short-term effect on shareholder wealth of banking mergers and acquisitions during periods of real economic expansion and contraction
- Authors: Kerr, Gordon Roy
- Date: 2011
- Subjects: Bank mergers , Consolidation and merger of corporations , Business cycles , Corporations -- Investor relations , Stockholder wealth , Rate of return
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1108 , http://hdl.handle.net/10962/d1013442
- Description: Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.
- Full Text:
- Date Issued: 2011
- Authors: Kerr, Gordon Roy
- Date: 2011
- Subjects: Bank mergers , Consolidation and merger of corporations , Business cycles , Corporations -- Investor relations , Stockholder wealth , Rate of return
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1108 , http://hdl.handle.net/10962/d1013442
- Description: Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.
- Full Text:
- Date Issued: 2011
Utilizing geocaching to reduce obesity and increase tourism
- Authors: Von Solms, Woudi
- Date: 2011
- Subjects: Sports and tourism , Obesity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9291 , http://hdl.handle.net/10948/d1011157 , Sports and tourism , Obesity
- Description: Tourism has social and economic benefits. Economic benefits are received through tourists visiting tourist attractions. Social benefits related to benefits tourists receive personally when visiting tourist attractions. The number of individuals that are obese are constantly increasing and leads to hazardous medical conditions. The aim of this research study was to determine the extent to which geocaching can be used to increase tourism and decrease obesity. Geocaching is similar to a treasure hunt where participant use clues and a Global Positioning System device to find a treasure that are called a cache. The cache is filled with trinkets that are exchanged by participants that find the cache. Students of the second avenue campus of the Nelson Mandela Metropolitan University were used as respondents and given information on what geocaching involve. Three geocaches were hidden in The Boardwalk Casino and Entertainment World in Summerstrand, Port Elizabeth. The respondents met at The Boardwalk Casino and Entertainment World where a clue and map was provided. After finding the cache the respondents was asked to complete an anonymous questionnaire. The results were calculated and conclusions and recommendations were made. The primary research process was conducted over too short a period of time to conclude whether it can lead to a reduction in obesity. However geocaching experience by respondents did show that the process of geocaching involves physical exercise, which is needed for losing weight. Research also indicated that respondents would like to geocache with family and friends. Geocaching with family and friends involves support which secondary research have also proven is important to losing weight and decreasing obesity. Respondents indicated that they enjoyed geocaching and would like to geocache in their free time. The indication of enjoying geocaching, participating in geocaching during free time allows travelling for leisure purposes as to geocache travelling is necessary and the majority of geocaches is hidden at tourist attractions. The combination of travelling to tourist attractions, enjoying the experience and partaking in physical exercise with family and friends involve two of the three main aspects seen as helping to reduce obesity: enjoyable physical activity and support from family and friends. The conclusion is therefore that geocaching can be utilised to increase tourism and reduce obesity.
- Full Text:
- Date Issued: 2011
- Authors: Von Solms, Woudi
- Date: 2011
- Subjects: Sports and tourism , Obesity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9291 , http://hdl.handle.net/10948/d1011157 , Sports and tourism , Obesity
- Description: Tourism has social and economic benefits. Economic benefits are received through tourists visiting tourist attractions. Social benefits related to benefits tourists receive personally when visiting tourist attractions. The number of individuals that are obese are constantly increasing and leads to hazardous medical conditions. The aim of this research study was to determine the extent to which geocaching can be used to increase tourism and decrease obesity. Geocaching is similar to a treasure hunt where participant use clues and a Global Positioning System device to find a treasure that are called a cache. The cache is filled with trinkets that are exchanged by participants that find the cache. Students of the second avenue campus of the Nelson Mandela Metropolitan University were used as respondents and given information on what geocaching involve. Three geocaches were hidden in The Boardwalk Casino and Entertainment World in Summerstrand, Port Elizabeth. The respondents met at The Boardwalk Casino and Entertainment World where a clue and map was provided. After finding the cache the respondents was asked to complete an anonymous questionnaire. The results were calculated and conclusions and recommendations were made. The primary research process was conducted over too short a period of time to conclude whether it can lead to a reduction in obesity. However geocaching experience by respondents did show that the process of geocaching involves physical exercise, which is needed for losing weight. Research also indicated that respondents would like to geocache with family and friends. Geocaching with family and friends involves support which secondary research have also proven is important to losing weight and decreasing obesity. Respondents indicated that they enjoyed geocaching and would like to geocache in their free time. The indication of enjoying geocaching, participating in geocaching during free time allows travelling for leisure purposes as to geocache travelling is necessary and the majority of geocaches is hidden at tourist attractions. The combination of travelling to tourist attractions, enjoying the experience and partaking in physical exercise with family and friends involve two of the three main aspects seen as helping to reduce obesity: enjoyable physical activity and support from family and friends. The conclusion is therefore that geocaching can be utilised to increase tourism and reduce obesity.
- Full Text:
- Date Issued: 2011
Adjustment of commercial banks' interest rates and the effectiveness of monetary policy: evidence from Anglophone West Africa
- Authors: Bangura, Lamin
- Date: 2011
- Subjects: Monetary policy -- Africa, West , Banks and banking -- Africa, West , Interest rates -- Africa, West
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:951 , http://hdl.handle.net/10962/d1002685 , Monetary policy -- Africa, West , Banks and banking -- Africa, West , Interest rates -- Africa, West
- Description: Most central banks use short-term interest rates as their main instrument of monetary policy. It is assumed that a change in policy rate will influence interest rates set by commercial banks, but this is not usually the case. Commercial banks adjust their interest rates in response to changes in policy rate with lags, which make their interest rates sticky. Stickiness in commercial banks interest rates have been seen as an obstacle to the smooth transmission of monetary policy decisions. Despite the importance of the transmission process, little attention has been given to a systematic measurement of the degree of response of commercial banks‟ interest rates to changes in monetary policy stance in the Anglophone West African countries, specifically within the West African Monetary Zone (WAMZ) economies. Against this backdrop, this study explores the interest rate adjustment dynamics using monthly interest rate series on discount rate, treasury bill rate, commercial banks‟ deposit and lending rates from 1989 to 2009 (for Gambia, Nigeria and Sierra Leone) and from 2000 to 2009 (for Ghana). Specifically, the study set out to examine how lending and deposit rates respond to changes in the official rates and to see whether there is a convergence among the rates over time. Also, to examine the relative adjustment of commercial bank lending rates to changes in the official rate when there is disequilibrium. The analyses were twofold: a full sample period and a rolling window analysis. Following Cottarelli and Kourelis (1994), the study employed cointegration technique and an asymmetric error correction model to obtain the short-run and long-run parameters from which the error correction coefficients, mean adjustment lags and asymmetric mean adjustment lags were estimated. The results for the entire sample period revealed that the long-run pass-through in Nigeria was 81% and 67% for lending rates and deposit rates respectively. In Ghana, it was 66% and 69% for lending and deposit rates respectively. While in Sierra Leone, long-run pass-through was 62% and 72% for lending and deposit rates respectively. In Gambia, it was 50% and 40% for lending and deposit rates respectively. On the other hand, the short-run pass-through was found to be lower compared to the long-run pass-through: in Nigeria it was 66% and 47%; in Gambia, 26% and 29%; in Sierra Leone, 30% and 13%; and in Ghana, -6% and 35% for lending and deposit rates respectively in each country. The pass-through estimates for the rolling windows were mixed for short-run and long-run pass-through. The mean adjustment lags suggest that the speed of adjustment of Lending rates for full sample period were two, two, seven and twelve months in Nigeria, Ghana, Sierra Leone and Gambia respectively. While for deposit rates they were five, six, seven and eighteen for Ghana, Nigeria, Gambia and Sierra Leone respectively. The average speeds of adjustment for the rolling windows were four and five months for lending and deposit rates respectively. Weak evidence of convergence was found in lending and deposit rates in the short-run and long-run pass-through among the countries. However, the results suggest that the magnitude and speed of the pass-through amongst the countries on average were high compared to emerging Asian countries. Significant asymmetric adjustments were found in the lending rates for Gambia and Sierra Leone, while in Gambia and Nigeria there were asymmetries in deposit rates. Based on the evidence provided, interest rate pass-through is high in Nigeria and Ghana compared to Gambia and Sierra Leone and this calls for the harmonization of financial policies on the part of the financial authorities in the WAMZ. Viewed solely from an interest rate pass-through, the lack of convergence among the countries suggests that WAMZ is far from ready for a monetary union. The relatively low pass-through in some of the countries suggests rigidity in the banking system which may be due to underdevelopment of the system. Thus efforts geared toward strengthening the banking system and the financial system as whole would further enhance the prospect of a monetary union among them.
- Full Text:
- Date Issued: 2011
- Authors: Bangura, Lamin
- Date: 2011
- Subjects: Monetary policy -- Africa, West , Banks and banking -- Africa, West , Interest rates -- Africa, West
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:951 , http://hdl.handle.net/10962/d1002685 , Monetary policy -- Africa, West , Banks and banking -- Africa, West , Interest rates -- Africa, West
- Description: Most central banks use short-term interest rates as their main instrument of monetary policy. It is assumed that a change in policy rate will influence interest rates set by commercial banks, but this is not usually the case. Commercial banks adjust their interest rates in response to changes in policy rate with lags, which make their interest rates sticky. Stickiness in commercial banks interest rates have been seen as an obstacle to the smooth transmission of monetary policy decisions. Despite the importance of the transmission process, little attention has been given to a systematic measurement of the degree of response of commercial banks‟ interest rates to changes in monetary policy stance in the Anglophone West African countries, specifically within the West African Monetary Zone (WAMZ) economies. Against this backdrop, this study explores the interest rate adjustment dynamics using monthly interest rate series on discount rate, treasury bill rate, commercial banks‟ deposit and lending rates from 1989 to 2009 (for Gambia, Nigeria and Sierra Leone) and from 2000 to 2009 (for Ghana). Specifically, the study set out to examine how lending and deposit rates respond to changes in the official rates and to see whether there is a convergence among the rates over time. Also, to examine the relative adjustment of commercial bank lending rates to changes in the official rate when there is disequilibrium. The analyses were twofold: a full sample period and a rolling window analysis. Following Cottarelli and Kourelis (1994), the study employed cointegration technique and an asymmetric error correction model to obtain the short-run and long-run parameters from which the error correction coefficients, mean adjustment lags and asymmetric mean adjustment lags were estimated. The results for the entire sample period revealed that the long-run pass-through in Nigeria was 81% and 67% for lending rates and deposit rates respectively. In Ghana, it was 66% and 69% for lending and deposit rates respectively. While in Sierra Leone, long-run pass-through was 62% and 72% for lending and deposit rates respectively. In Gambia, it was 50% and 40% for lending and deposit rates respectively. On the other hand, the short-run pass-through was found to be lower compared to the long-run pass-through: in Nigeria it was 66% and 47%; in Gambia, 26% and 29%; in Sierra Leone, 30% and 13%; and in Ghana, -6% and 35% for lending and deposit rates respectively in each country. The pass-through estimates for the rolling windows were mixed for short-run and long-run pass-through. The mean adjustment lags suggest that the speed of adjustment of Lending rates for full sample period were two, two, seven and twelve months in Nigeria, Ghana, Sierra Leone and Gambia respectively. While for deposit rates they were five, six, seven and eighteen for Ghana, Nigeria, Gambia and Sierra Leone respectively. The average speeds of adjustment for the rolling windows were four and five months for lending and deposit rates respectively. Weak evidence of convergence was found in lending and deposit rates in the short-run and long-run pass-through among the countries. However, the results suggest that the magnitude and speed of the pass-through amongst the countries on average were high compared to emerging Asian countries. Significant asymmetric adjustments were found in the lending rates for Gambia and Sierra Leone, while in Gambia and Nigeria there were asymmetries in deposit rates. Based on the evidence provided, interest rate pass-through is high in Nigeria and Ghana compared to Gambia and Sierra Leone and this calls for the harmonization of financial policies on the part of the financial authorities in the WAMZ. Viewed solely from an interest rate pass-through, the lack of convergence among the countries suggests that WAMZ is far from ready for a monetary union. The relatively low pass-through in some of the countries suggests rigidity in the banking system which may be due to underdevelopment of the system. Thus efforts geared toward strengthening the banking system and the financial system as whole would further enhance the prospect of a monetary union among them.
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- Date Issued: 2011