Testing the applicability of the Twin deficits and the Ricardian equivalence hypotheses in South Africa
- Authors: Makua, Khutso Baltimore
- Date: 2021-04
- Subjects: Budget deficits -- South Africa , South Africa -- Economic conditions , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51831 , vital:43376
- Description: This study investigates the applicability of the twin deficit and Ricardian equivalence hypotheses in South Africa by exploring the relationship between budget deficits and current account deficits for the period 1990-2020 in South Africa. The reviewed theoretical and empirical literature has shown the results of this relationship to be mixed, depending on the region in review and the policy regime in some instances. The Johansen cointegration test was used because it has advantage over the Engle-Granger over the number of cointegrating relationships they both test. Compared to Engle-Granger, Johansen cointegration allows for more than one cointegrating relationship. The test show evidence that there is cointegration between current account deficits, budget deficits and other explanatory variables. The tests indicated the presence of cointegration which led to the estimation of VECM. Co-integration and vector error correction modelling techniques were applied to South African data between 1990 to 2020 period. The study at hand indicated that government budget deficits have a long run negative effect on current account deficits, but Granger causality failed to prove the direction of causality between the main variables, current account deficits and current account deficits. Therefore, the study concluded that the twin deficits hypothesis is not applicable in South Africa and revealed that South Africa is a Ricardian economy as Granger causality could not establish that budget deficits cause current account deficits. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Makua, Khutso Baltimore
- Date: 2021-04
- Subjects: Budget deficits -- South Africa , South Africa -- Economic conditions , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51831 , vital:43376
- Description: This study investigates the applicability of the twin deficit and Ricardian equivalence hypotheses in South Africa by exploring the relationship between budget deficits and current account deficits for the period 1990-2020 in South Africa. The reviewed theoretical and empirical literature has shown the results of this relationship to be mixed, depending on the region in review and the policy regime in some instances. The Johansen cointegration test was used because it has advantage over the Engle-Granger over the number of cointegrating relationships they both test. Compared to Engle-Granger, Johansen cointegration allows for more than one cointegrating relationship. The test show evidence that there is cointegration between current account deficits, budget deficits and other explanatory variables. The tests indicated the presence of cointegration which led to the estimation of VECM. Co-integration and vector error correction modelling techniques were applied to South African data between 1990 to 2020 period. The study at hand indicated that government budget deficits have a long run negative effect on current account deficits, but Granger causality failed to prove the direction of causality between the main variables, current account deficits and current account deficits. Therefore, the study concluded that the twin deficits hypothesis is not applicable in South Africa and revealed that South Africa is a Ricardian economy as Granger causality could not establish that budget deficits cause current account deficits. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
Understanding the South African international investment position and the valuation effects: subtitle if needed. If no subtitle follow instructions in manual
- Authors: Hlati, Sisamnkelo
- Date: 2021-04
- Subjects: Investments, Foreign -- South Africa , South Africa -- Economic conditions , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51534 , vital:43298
- Description: This study examines the relationship between the South African Net International Investment Positions and the valuation effects over a period of 47 years from 1970 to 2017. To investigate the long run relationship between NIIP and the determinants thereof, this current study made use of the bounds test technique and the results indicate that a long run relationship exist. In which case, the autoregressive distributed lag model to empirically investigate the impact of the current account balance, capital account balance and the valuation effects on the South African NIIP was conducted and this current study finds out that there is a long run positive relationship between the current account balance and the South African NIIP. However, the study noted that the impact of the current account balance is volatile and this could be due to the net investment income payments (in a form of interest and dividend) made to foreign investors, which constitute a proportionately large share of the South African current account deficit. The capital account balance exhibits a positive long run impact on the South African NIIP in line with theory. The valuation effects on the other hand indicate a relatively stable impact on the South African NIIP, while in the long run have a positive impact on NIIP. The positive impact of the valuation effects could be due to gains being relatively larger than losses in the long run. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Hlati, Sisamnkelo
- Date: 2021-04
- Subjects: Investments, Foreign -- South Africa , South Africa -- Economic conditions , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/51534 , vital:43298
- Description: This study examines the relationship between the South African Net International Investment Positions and the valuation effects over a period of 47 years from 1970 to 2017. To investigate the long run relationship between NIIP and the determinants thereof, this current study made use of the bounds test technique and the results indicate that a long run relationship exist. In which case, the autoregressive distributed lag model to empirically investigate the impact of the current account balance, capital account balance and the valuation effects on the South African NIIP was conducted and this current study finds out that there is a long run positive relationship between the current account balance and the South African NIIP. However, the study noted that the impact of the current account balance is volatile and this could be due to the net investment income payments (in a form of interest and dividend) made to foreign investors, which constitute a proportionately large share of the South African current account deficit. The capital account balance exhibits a positive long run impact on the South African NIIP in line with theory. The valuation effects on the other hand indicate a relatively stable impact on the South African NIIP, while in the long run have a positive impact on NIIP. The positive impact of the valuation effects could be due to gains being relatively larger than losses in the long run. , Thesis (MCom) -- Faculty of Business and Economic Sciences, Economics, 2021
- Full Text:
- Date Issued: 2021-04
The effects of external shocks on economic growth in South Africa
- Authors: Mzayidume, Lonwabo
- Date: 2022-04
- Subjects: Economic development , South Africa -- Economic conditions
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/58024 , 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. , Thesis (MA) -- Faculty of Business and Economic science, 2022
- Full Text:
- Date Issued: 2022-04
- Authors: Mzayidume, Lonwabo
- Date: 2022-04
- Subjects: Economic development , South Africa -- Economic conditions
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/58024 , 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. , Thesis (MA) -- Faculty of Business and Economic science, 2022
- Full Text:
- Date Issued: 2022-04
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