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
- Full Text:
- Date Issued: 2023
- 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
- Full Text:
- Date Issued: 2023
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.
- Full Text:
- Date Issued: 2011
- 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.
- Full Text:
- Date Issued: 2011
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