- Title
- Determinants of household savings in South Africa
- Creator
- Malindini, Kholiswa
- Subject
- Cost and standard of living -- South Africa
- Subject
- Home economics -- South Africa
- Date Issued
- 2016
- Date
- 2016
- Type
- Thesis
- Type
- Masters
- Type
- MCom
- Identifier
- http://hdl.handle.net/10948/8436
- Identifier
- vital:26356
- Description
- This study empirically evaluates the determinant of household savings in South Africa (1985- 2013). The study used co-integration and Vector Error Correction Mechanism to determine the relationship between household savings and the selected explanatory variables. The study made use of a quarterly time series data sets from the SARB quarterly bulletin. The long-run relationship between savings and its determinants was examined using the procedure suggested in the literature by Johansen. The results of the co-integration tests suggest that there is a long-run relationship between savings and household wealth. The results suggest that wealth is a main determinant of household savings in the long run. However, the impulse response function and the variance decomposition indicated that household debt is dominant in explaining the variations in household savings better than other explanatory variables confirm. On the other hand, household debt, household disposable income and cpi (inflation) and interest rates have negative effects on household savings in the long run. Further, the estimated results revealed that disposable income, interest rate and inflation have statistically significant influence on household savings in South Africa. The implication of the results obtained from impulse response and variance decomposition is that South Africa has liberalized its financial sector to a large extent over the past decade such that households are over indebted. The main reasons for the decline in savings in South Africa is easy availability of Credit which encouraged consumers to take out loans, the rising house prices which encouraged consumers to borrow because of their positive wealth effect, Cultural/Social trends encouraging an attitude of borrowing and spending and lastly low interest rates (both in nominal and real terms). To this end, the study suggests that the South African National Credit Regulator conduct a credit audit to spot-check credit providers’ compliance with the provisions on reckless credit and over-indebtedness. More focus should be placed on indirect measures for preventing over-indebtedness, for example education. It is recommended that governmental or private organisations should set up educational programmes to improve information and advice on the risks attached to consumer credit. It is further suggested these programmes focus on money management for use in schools be made compulsory so as to raise awareness levels and establish financial literacy from an early age. This recommendation is based on the principle that prevention is better than cure.
- Format
- xi, 91 leaves
- Format
- Publisher
- Nelson Mandela Metropolitan University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela Metropolitan University
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