The impact of fiscal and monetary policies on manufacturing sector performance in South Africa
- Authors: Hunter, Desireѐ
- Date: 2023
- Subjects: Manufacturing industries -- South Africa , Fiscal policy -- South Africa , Monetary policy -- South Africa
- Language: English
- Type: Doctoral theses , text
- Identifier: http://hdl.handle.net/10353/28549 , vital:74417
- Description: Regulatory authorities have to date utilised a strategic blend of fiscal and monetary policies in dealing with the unique set of macroeconomic conditions facing South Africa. Government policy intervention has significant implications for economic growth and output within the manufacturing environment. Heterogeneity has also been discerned in relation to the responsiveness of various industries within the manufacturing sector towards both fiscal and monetary policy variable variations. However, given weakened growth prospects, policy alignment issues have been observed. The purpose of this study was firstly, to examine the impact of fiscal and monetary variables on manufacturing sector output in South Africa and secondly, to analyse the manufacturing industry significance of the various monetary transmission mechanism channels. The study made use of quarterly and monthly data to achieve these stated objectives, dated between 1998 and 2020. To achieve the first objective, the study employed the Autoregressive Distributed Lag (ARDL) model given the order of integration of the variables. The empirical results revealed significant, positive relations between tax revenue, deficit financing, nominal effective exchange rate (NEER) and money supply (M3) for total manufacturing (LTOTAL). Contrastingly, there were negative links between LTOTAL, government spending and the lending rate. At a disaggregated industry level, there were positive relations with tax revenue in food and wood industries, although tax revenue was significantly negative for metals. Likewise, to LTOTAL, linkages with spending were significantly negative for wood and metal industries but positive for chemicals. Negative spending signage could be a result of crowding-out. For deficit financing, positive associations within chemicals did not conform to expectations. Similarly, to LTOTAL, wood and metal industries conformed to expectations of negative relations with the lending rate. In respect of the NEER in food and wood production, significant, positive links were established. Contrastingly, a negative linkage existed for chemical activities at the 5% level. Concerning M3 and akin to LTOTAL, the relation with metal industries was positive. However, negative findings for food and chemicals contradicted expectations, suggesting money supply was not efficiently utilised in managing monetary variables in the long-term. The second objective of the study focused on analysing manufacturing industry significance of the various monetary transmission mechanism channels. The Vector Error Correction Model (VECM) were employed to analyse the relationship between the variables. Impulse response and variance decomposition were also constructed to further trace which channel is more significant in influencing manufacturing output. The empirical results revealed that the interest rate channel occupied a relatively significant role in both LTOTAL and several selected manufacturing industries. Shocks accounted for 9.71%, 11.96% and 14.28% of the variance in LTOTAL, metal and chemical industries. The asset price channel also appeared relatively significant, with shocks to the FTSE/JSE all-share index explaining 18.21% and 21.13% of the variation in food and wood production, signifying the most relevant channel for these particular industries and representing the second most important channel for LTOTAL and the other remaining industries. The exchange rate channel also presented as being a more relevant channel for food and wood, but occupied little role in LTOTAL, whilst the credit channel was relatively ineffectual for both LTOTAL and all industries examined. The results obtained imply that government should exercise caution and demonstrate fiscal restraint and that the South African Reserve Bank (SARB) need to take greater consideration of output fluctuations in monetary policy setting. Research has dictated that an expansionary fiscal policy is generally required as a means to achieving increased growth. However, findings obtained at both the aggregate and disaggregated manufacturing level in South Africa largely varied. This implies significant heterogeneity within the South African manufacturing sector in respect of fiscal policy responses. Expansionary fiscal stimulus packages need to be better targeted towards industries that will most benefit. Similarly, monetary policy responses at the aggregate and disaggregated manufacturing level in South Africa were heterogeneous and furthermore, differed when examining combined policy impacts. There was also a heterogeneous response with respect to relevance of the channels, via which monetary policy operated, with the interest rate channel dominating. SARB do take into consideration output fluctuations in policy setting but this is not currently emphasised or legislated. , Thesis (DCom) -- Faculty of Management and Commerce, 2023
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- Date Issued: 2023
The effect of real exchange rate volatility on export performance: evidence from South Africa (2000-2011)
- Authors: Chamunorwa, Wilson
- Date: 2014
- Subjects: Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11499 , http://hdl.handle.net/10353/d1018600 , Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Description: The effect of real exchange rate volatility on export performance: evidence from South Africa (2000-2011) This study sought to investigate the relationship between exchange rate volatility and export performance in South Africa. The main objective of the study was to examine the impact of exchange rate volatility on export performance in South Africa. This relationship was examined using GARCH methods. Exports were regressed against real effective exchange rate, trade openness and capacity utilisation. The research aimed to establish whether exchange rate volatility impacts negatively on export performance in the manner suggested by the econometric model. The result obtained showed that exchange rate volatility had a significantly negative effect on South African exports in the period 2000-2011.
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- Date Issued: 2014
Central Bank policy and the exchange rate under an inflation targeting regime: a case dtudy of South Africa
- Authors: Gonzo, Prosper
- Date: 2013
- Subjects: Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11476 , http://hdl.handle.net/10353/d1015043 , Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Description: This work examined the optimality of the inclusion of the exchange rate in the reaction function of the Central Bank in an inflation targeting framework. The study attempts to answer the question whether the exchange rate should have an independent role in an open economy Taylor-type rule. To this end, a Taylor-type rule is incorporating the exchange rate is estimated by the cointegration and vector error correction modeling (VECM) using quarterly data for the period of 1995 to 2009. The empirical studies point out the importance of the exchange rates in explaining and forecasting the behaviour of the South African Reserve Bank monetary policy control variable.
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- Date Issued: 2013
Dynamic linkages between monetary policy and the stock market: the case of South Africa
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
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- Date Issued: 2013
Financial liberalisation and economic growth in South Africa
- Authors: Sibanda, Hlanganani Siqondile.
- Date: 2012
- Subjects: Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11471 , http://hdl.handle.net/10353/d1007131 , Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Description: This study examined the impact of financial liberalisation on economic growth in South Africa. The study used quarterly time series data for the period 1980 to 2010. A vector error correction model was used to determine the short run and long run effects of financial liberalisation on economic growth in South Africa. The other explanatory variables considered in this study were government expenditure, investment ratio, public expenditure on education and trade openness. Results from this study revealed that financial liberalisation, government expenditure and public expenditure on education have a positive impact on economic growth while trade openness negatively affects economic growth in South Africa. Policy recommendations were made using these results.
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- Date Issued: 2012
An investigation into the demand for money in South Africa during the period (1990-2009)
- Authors: Simawu, Moreblessing https://orcid.org/0000-0003-4413-4660
- Date: 2011
- Subjects: Demand for money -- South Africa , Monetary policy -- South Africa
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/24421 , vital:62789
- Description: A stable money demand function plays a vital role in the analysis of macroeconomics, especially in the planning and implementation of monetary policy. With the use of Johansen cointegration and error correction model estimates, this study examines the existence of a stable long-run relationship between real money demand (RM2 and RM3) and its explanatory variables, in South Africa, for the period 1990-2009. The explanatory variables used in this study are selected on the basis of different monetary theories and empirical works, including the Keynesian, Classical and Friedman’s modern quantity theory of money. Based on these theories, the explanatory variables used in this thesis are real income, an interest rate, the inflation rate ,the exchange rate and foreign interest rate. The signs of the coefficients of the variables are as expected from economic theory. The coefficients of real income, the exchange rate and foreign interest rate are positive, while the coefficients of the interest rate and inflation rate are negative. This study augments the cointegration and vector autoregression (VAR) analysis with impulse response and variance decomposition analyses to provide robust long run effects and short run dynamic effects on the real money demand. In addition a foreign interest rate to capture the impact of capital mobility on money demand in South Africa was used. Results from the Johansen test suggest that real money demand (RM2 and RM3) and its all explanatory variables are cointegrated. Hence, there is a long-run equilibrium relationship between the real quantity of money demanded and five broadly defined macroeconomic components namely, real income, an interest rate, the inflation rate, foreign interest rate and the exchange rate in South Africa. Overall, the study finds that the coefficients of the equilibrium error terms are negative, as expected, and significantly different from zero, implying that 0.16 and 0.1 of the discrepancy between money demand and its explanatory variables is eliminated in the following quarter. Application of CUSUM and CUSUMSQ stability test showed that real money demand (M2 and M3) is stable in South Africa. The impulse response analysis provided evidence that the real M3 money, national income, rate of inflation and the foreign interest rate have a significant impact on the real M3 money demand in the short run. However, remaining variables (the real exchange rate and prime overdraft rate), have only a transitory effect on the real M3 money demand. There was further evidence that real exchange rate, the rate of inflation and the foreign interest rate, have a significant impact on the real M2 money demand in the short run. However, remaining variables (the national income and prime overdraft rate), have only a transitory effect on the real M2 money demand. Results from the variance decompositions of the real money demand are basically similar to those from the impulse response analysis and reveal that the fundamentals explain some, but not all, of the variations of the real money demand. The results showed that the national income explains the largest component of the variation in the real M2 money demand followed by the exchange rate and foreign interest rate. Shocks to the other variables continued to explain an insignificant proportion of the variation in the real M2 money demand. The national income also explains the largest component of the variation in the real M3 money demand followed by the foreign interest rate and exchange rate. Shocks to the other variables continued to explain a less significant proportion of the variation in the real M3 money demand.The study finds that both real M2 and M3 are stable which makes monetary targeting a viable policy option for the SARB. , Thesis (MCom) -- Faculty of Management and Commerce, 2011
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- Date Issued: 2011
Fiscal policy and unemployment in South Africa 1980 to 2010
- Authors: Murwirapachena, Genius
- Date: 2011
- Subjects: Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11458 , http://hdl.handle.net/10353/544 , Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Description: Unemployment is one of the greatest and most complex challenges facing South Africa. Just like most developing countries, South Africa has been using the fiscal policy framework as a tool to alleviate the high rates of unemployment. This study examined the impact of fiscal policy on unemployment in South Africa. The study used annual time series data for the period 1980 to 2010. A vector error correction model was used to determine the effects of fiscal policy aggregates on unemployment in South Africa. The fiscal policy aggregates considered in this study were government investment expenditure, government consumption expenditure and tax. Results from this study revealed that government consumption expenditure and tax have a positive impact on unemployment while government investment expenditure negatively affects unemployment in South Africa. Policy recommendations were made using these results.
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- Date Issued: 2011