- Title
- The effects of external shocks on economic growth in South Africa
- Creator
- Mzayidume, Lonwabo
- Subject
- Economic development
- Subject
- South Africa -- Economic conditions
- Date Issued
- 2022-04
- Date
- 2022-04
- Type
- Master's theses
- Type
- text
- Identifier
- http://hdl.handle.net/10948/58024
- Identifier
- vital:58499
- Description
- External shocks are defined as unexpected changes in an economic variable which can influence economies either positively or negatively. Examples of such shocks can include oil price and terms of trade shocks. Globalisation has increased the susceptibility of economies worldwide to economic shocks emanating from developed countries, due to the existing trade and financial links between various countries around the world. The objectives of this study are to investigate the effects of external shocks on economic growth in South Africa and to develop policies which could be used to prevent or soften the negative effects of external shocks in South Africa. Since the beginning of democracy in 1994, the South African economy has been opened to the world market. However, there have not been substantial gains in terms of economic growth. A possible explanation for this is that the dynamics of large economies influence the average demand, average supply, economic activities, and price changes in small open economies. South Africa’s dependence on foreign trade and attracting foreign savings to drive domestic investment increases the country’s vulnerability to the effects of external shocks. In this study, the South African economy is proxied by one key measure of economic performance, economic growth rate. The purpose of the study is to advance the understanding of the effects of external shocks on economic growth in South Africa. The study uses the structural VAR model. As South Africa is a relatively small open economy, the structural VAR model is theoretically consistent with countries of similar ilk. This study concludes that South Africa’s economic growth is significantly affected by commodity price index, U.S. GDP, and oil rents. In addition, this study concludes that South Africa is contemporaneously and positively affected by oil rents shocks and terms of trade shocks. Furthermore, it shows that economic growth in South Africa is contemporaneously and negatively affected by capital inflow shocks, nominal vi exchange rate shocks, and CPI shocks. Further SVAR estimates support the finding that capital inflows adversely affect South African economic growth. A possible reason for this outcome is that the number of domestic producers is reduced as a result of domestic producers being negatively affected by the capital inflow shocks. To combat the adverse effects of capital inflows, the study recommends that South Africa enforces more measures to protect domestic producers. The implementation of protectionist policies is one way in which this could be accomplished. These policies would promote domestic producers and ensure the production of domestic goods and services is increased.
- Description
- Thesis (MA) -- Faculty of Business and Economic science, 2022
- Format
- computer
- Format
- online resource
- Format
- application/pdf
- Format
- 1 online resource (xi, 149 pages)
- Format
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Business and Economic science
- Language
- English
- Rights
- Nelson Mandela University
- Rights
- All Rights Reserved
- Rights
- Open Access
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