The Stability Of The Money Demand Function In South Africa: A VAR-Based Approach

The study examines the stability of the money demand function from 1994 to 2012 using quarterly data. The study utilises the Johansen co-integration to analyse the long-term relationship between the money demand function and its determinants. The CUSUM and CUSUMSQ were also used to examine the stability of the South African money demand function. The co-integration test proved that there exists a long-term relationship between the money demand function and its determinants. However, the CUSUM and CUSUMSQ proved that the South African money demand was unstable from 2003 to 2007. This therefore justifies the use of the repo rate as a monetary policy tool as compared to the monetary aggregates

Stock Market Integration in Africa: The Case of the Johannesburg Stock Exchange and Selected African Countries

African stock markets are deemed to be small, segmented and illiquid. Given this back ground, the study utilises monthly data for the period 2000-2008, employing the Johansen and Julius cointegration method to determine the long-run relationship between the five selected African stock markets. Granger causality tests were also conducted to establish if there are any causal links between the stock markets in Africa. The analysis in the study indicates that African stock markets are improving in performance, generally, growing and developing. However empirical results indicate that African markets are segmented. Further analysis to determine the relationship between the five selected African stock markets and the world stock markets shows that African stock markets are affected by developments in the international markets. Hence, portfolio diversification opportunities exist in the African stock markets suggesting that investors should also consider investing in their African countries as they offer opportunities rather than considering investing in the international markets only

Determinants Of Savings In The SADC Region: The Role Of Foreign Capital And Financial Development

The study examines the determinants of savings in the SADC region, mainly focusing on the roles played by external financial flows and financial development in mobilising domestic savings utilising panel cointegration method and the Dynamic ordinary Least Squares (DOLS) approach from 1980 to 2009. Following the review of literature, the empirical model adopted established that there is a long-run relationship between the variables of interest. The results indicate that income, proxied with GDP, financial sector development and foreign capital have a positive relationship with savings. The results also suggest that financial sector development has played a very important role in influencing savings in the region. However on the other hand the results indicate that interest rate and dependency ratio have influenced savings negatively. The empirical results support the hypothesis that foreign savings bridges the gap between domestic demand and supply of finance in the SADC countries. There is need to attract more foreign capital given that it compliments domestic savings. At the same time policies aimed at financial deepening should still be pursued to further deepen the financial system in the SADC countries to further enhance savings.

The Relationship between External Financial Flows and Economic Growth in the Southern African Development Community (SADC): The Role of Institutions

The study examined the relationship between external financial flows, domestic savings and economic growth in the SADC region for the period from 1980 to 2009 specifically looking at the role played by institutions. The majority of countries in the SADC region are experiencing low levels of savings, which has led to them relying more on external financial flows to bridge the gap between domestic demand for finance and domestic supply. However the relationship between external finance and economic growth is still a contentious issue. Given this, the study has thus examined the link between growth and external finance in the region, specifically focusing on the impact of the different forms of external financial flows on economic growth in the region incorporating the role played by institutions. The empirical results revealed that three types of external financial flows have a significant impact on economic growth in the SADC region except ODA; however when all the different types of external financial flows were interacted with the measure of institutions, they all become significant and more enhanced in explaining economic growth in the region. This supports the hypothesis that good institutions are necessary in promoting economic growth in developing countries. The empirical results also suggest that foreign capital is another channel through which a crisis in developing countries can be transmitted to the SADC region

Understanding the nexus between savings and economic growth: A South African context

CITATION: Bianca Flavia van Wyk & Forget Mingiri Kapingura (2021) Understanding the nexus between savings and economic growth: A South African context, Development Southern Africa, 38:(5):828-844, doi:10.1080/0376835X.2021.1932424The original publication is available at: tandfonline.comThe study examines the relationship between savings and economic growth in South Africa for the period 1986–2018. The Johansen cointegration technique and the Vector Error Correction Model were employed as methods of analysis. The findings from the study indicate that the effect of savings on economic growth in South Africa is negative . However, a positive relationship between the two variables was established in the short-run. Granger causality tests were also utilised to determine the direction of causality between savings and economic growth. The results revealed that the relationship runs from economic growth to gross domestic savings. Another important observation from the study is the role of investment which was found to have a positive effect on economic growth. This result also supports the idea of promoting investment if the country is to achieve sustainable economic growth.Publisher’s versio

Econometric determinants of liquidity of the South African bond market

The importance of the bond market to the financial system and broader economy of a country cannot be underestimated. It is important to analyse factors which determine liquidity in this essential market. This study seeks to establish the determinants of liquidity in the South African bond market using monthly data covering the period 1995 to 2009. It begins by providing an updated overview of the South African bond market and an analysis of the relevant literature. Two models linking bond market liquidity to its theoretical determinants were specified. In contrast to the available literature, this study analyses liquidity at both macroeconomic and market microstructure level using two measures of liquidity, volume and the bid-ask spread, applying the VAR approach and two-stage least squares for robust check. All macroeconomic variables (except stock market) were identified to have an impact on bond market liquidity in the long-run. As far as market microstructure factors are concerned, both volume and volatility were established to be important determinants of liquidity in the South African bond market. The study recommended that, as for macroeconomic factors, authorities should keep inflation at low and stables levels as well as a stable currency. Also, offering bond investors certain facilities and the removal of restrictions on foreign investor activities are other important conditions to improve bond market liquidity. As far as market microstructure factors are concerned, we suggest that, ways to safe-guard against excessive volatility include the creation of a vibrant derivative market, development of a more active and well-functioning repurchase market./Thesis (MCom) -- Faculty of Management and Commerce, 201

Econometric determinants of liquidity of the South African bond market

The importance of the bond market to the financial system and broader economy of a country cannot be underestimated. It is important to analyse factors which determine liquidity in this essential market. This study seeks to establish the determinants of liquidity in the South African bond market using monthly data covering the period 1995 to 2009. It begins by providing an updated overview of the South African bond market and an analysis of the relevant literature. Two models linking bond market liquidity to its theoretical determinants were specified. In contrast to the available literature, this study analyses liquidity at both macroeconomic and market microstructure level using two measures of liquidity, volume and the bid-ask spread, applying the VAR approach and two-stage least squares for robust check. All macroeconomic variables (except stock market) were identified to have an impact on bond market liquidity in the long-run. As far as market microstructure factors are concerned, both volume and volatility were established to be important determinants of liquidity in the South African bond market. The study recommended that, as for macroeconomic factors, authorities should keep inflation at low and stables levels as well as a stable currency. Also, offering bond investors certain facilities and the removal of restrictions on foreign investor activities are other important conditions to improve bond market liquidity. As far as market microstructure factors are concerned, we suggest that, ways to safe-guard against excessive volatility include the creation of a vibrant derivative market, development of a more active and well-functioning repurchase market./Thesis (MCom) -- Faculty of Management and Commerce, 201

The Impact of Digital Financial Inclusion and Bank Competition on Bank Stability in Sub-Saharan Africa

The last few years have witnessed a rapid development in digital finance that may threaten the manner in which traditional financial services are being used. It opens up new opportunities for low-income groups and small businesses that have limited or no access to formal financial services. Thus, digital financial inclusion plays a vital role in boosting a country’s financial inclusion, fulfilling some sustainable development goals and achieving higher economic growth. This study builds on a new measure of digital financial inclusion to examine the impact of digital financial inclusion and bank competition on bank stability in Sub-Saharan Africa for the period 2014 to 2020 using the two-step System Generalised Method of Moments. An index of digital financial inclusion, z-score, Herfindahl–Hirschman Index (HHI), and non-performing loans were used as data variables. The study findings reveal that digital financial inclusion has a significant positive relationship with bank stability (z-score) and a negative relationship with non-performing loans. The study also found a significant negative effect of bank competition (HHI) on bank stability in line with the competition-fragility view. Policymakers should ensure digital financial literacy for all since it feeds into bank stability and also reduces bank insolvency. They should also find ways of enhancing bank competition which reduces non-performing loans and bank insolvency. On practical implications, the study calls for strategic measures to preserve bank stability, such as complementing digital financial inclusion with financial literacy and enhancing bank competition

Drivers of capital inflow: Does global uncertainty matter?

Determinants of international capital inflow differ from one country to another, and as such country-specific studies are important in assisting each economy to understand cutting-edge policies which can be implemented to attain and retain desired capital inflow. The purpose of the present empirical effort is to examine the determinants of international capital inflow into the South African economy with special focus on the role of global uncertainty. The study investigated the determinants of portfolio inflow, direct capital inflow and total inflow using time series quarterly data from 1960(Q1) to 2021(Q3). The study employed the Dynamic Conditional Correlation (DCC GARCH) to investigate time-varying correlation among the variables in the light of more current data and Bayesian Linear Regression Model given its ability to deal with the problem of volatility. The overall picture that emerges from the study is that global uncertainty does not significantly correlate or affect portfolio inflow; while on the other hand, it negatively correlates and impacts direct capital inflow and total inflow. The implication is that government and South African policymakers should pay a closer attention to measures to mitigate global uncertainties in attempt to increase direct capital investment flow