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
An econometric analysis of the impact of economic freedom on economic growth in the SADC
- Authors: Gorlach, Vsevolod Igorevich
- Date: 2011
- Subjects: Economic development -- South Africa , Economic development
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8983 , http://hdl.handle.net/10948/1539 , Economic development -- South Africa , Economic development
- Description: The conventional approach to increasing economic growth - increasing inputs, such as labour and capital, is not always possible. The wider, fundamental sources of economic growth need to be considered too. Foreign aid is a temporary lifeline and does not spur economic growth. Conversely, financial assistance negatively affects growth and can hamper development prospects. Economic freedom and economically freer countries have been associated with higher growth rates, higher per capita incomes, greater volumes of trade, prosperity and overall wellbeing. By improving their economic freedom, deregulating the economy and allowing economic freedom to prosper, countries can experience sustained GDP growth. Previous studies have shown that economic freedom and economic growth are exponentially related - and that by initially becoming freer, countires can increase their growth rates at higher rates. The main objective of the SADC is to achieve development and economic growth, to alleviate poverty and enhance the standard and quality of life for the peoples of Southern Africa. The SADC is attempting to achieve economic integration through macroeconomic convergence. A number of macroeconomic variables have been set to act as primary indicators. These include inflation, fiscal balance, public debt and the current account balance. By introducing the concept that economic freedom can lead to higher growth rates and being able to identify economic freedom, it makes it possible to investigate how the SADC can achieve its set goals by becoming freer. By investigating individual components that constitute the overall freedom index, it becomes possible to establish the relationship that exists between this viriable and economic growth. This will illustrate where deregulation and freedom are most effective and where policy decisions need to be highlighted. The 2008 economic crisis revealed that countries that decreased their economic freedom have fared worse than countries allowing freedom to prosper. Government fiscal stimulus has had no positive impact on growth rates; the negative effects of reducing economic freedom will onlky be fully seen in future years. However, the majority of the SADC countries showed a relatively strong fiscal stance during the recession. This study established whether that a positive relationship between economic freedom and economic growth in the SADC. Secondly, the direction of causality that economic freedom leads to economic growth. The findings reveal that economic freedom fosters economic growth in general, and for the SADC in particular. Empirical evidence has been found for the SADC; and the implications of becoming freer are more fully explained.
- Full Text:
- Date Issued: 2011
- Authors: Gorlach, Vsevolod Igorevich
- Date: 2011
- Subjects: Economic development -- South Africa , Economic development
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8983 , http://hdl.handle.net/10948/1539 , Economic development -- South Africa , Economic development
- Description: The conventional approach to increasing economic growth - increasing inputs, such as labour and capital, is not always possible. The wider, fundamental sources of economic growth need to be considered too. Foreign aid is a temporary lifeline and does not spur economic growth. Conversely, financial assistance negatively affects growth and can hamper development prospects. Economic freedom and economically freer countries have been associated with higher growth rates, higher per capita incomes, greater volumes of trade, prosperity and overall wellbeing. By improving their economic freedom, deregulating the economy and allowing economic freedom to prosper, countries can experience sustained GDP growth. Previous studies have shown that economic freedom and economic growth are exponentially related - and that by initially becoming freer, countires can increase their growth rates at higher rates. The main objective of the SADC is to achieve development and economic growth, to alleviate poverty and enhance the standard and quality of life for the peoples of Southern Africa. The SADC is attempting to achieve economic integration through macroeconomic convergence. A number of macroeconomic variables have been set to act as primary indicators. These include inflation, fiscal balance, public debt and the current account balance. By introducing the concept that economic freedom can lead to higher growth rates and being able to identify economic freedom, it makes it possible to investigate how the SADC can achieve its set goals by becoming freer. By investigating individual components that constitute the overall freedom index, it becomes possible to establish the relationship that exists between this viriable and economic growth. This will illustrate where deregulation and freedom are most effective and where policy decisions need to be highlighted. The 2008 economic crisis revealed that countries that decreased their economic freedom have fared worse than countries allowing freedom to prosper. Government fiscal stimulus has had no positive impact on growth rates; the negative effects of reducing economic freedom will onlky be fully seen in future years. However, the majority of the SADC countries showed a relatively strong fiscal stance during the recession. This study established whether that a positive relationship between economic freedom and economic growth in the SADC. Secondly, the direction of causality that economic freedom leads to economic growth. The findings reveal that economic freedom fosters economic growth in general, and for the SADC in particular. Empirical evidence has been found for the SADC; and the implications of becoming freer are more fully explained.
- Full Text:
- Date Issued: 2011
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