Inflation dynamics in South Africa

Thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in the FACULTY OF COMMERCE LAW AND MANAGEMENT SCHOOL OF ECONOMICS AND BUSINESS SCIENCES at the UNIVERSITY OF THE WITWATERSRANDThe design and implementation of the monetary policy in South Africa has been based on the idea of a trade-off between inflation and output growth. However, there is no consensus among empirical investigations on the existence of Phillips curve in the present times. While the South African Reserve Bank (SARB) has instrument independence, it does not have goal independence, which implies that there is coordination between the monetary policy and other macroeconomic policies. Thus, if the SARB objectives are in line with the other policy objectives, there should be a relationship between monetary variables and real variables. This therefore shows that in the long-run, monetary policy cannot single-handedly bring about both sustained economic growth and employment creation (SARB, 2014). Thus this study explored inflation dynamics in South Africa by using the Hybrid new Keynesian Phillips curve (HNKPC) and the augmented Gordon’s models. The study firstly estimated the Hybrid new Keynesian Phillips curve model with a view to determine whether Phillips curve exists and ascertain whether the backward-looking or forward-looking components drive inflation dynamics in South Africa using OLS and GMM estimation techniques. The results show that the Phillips curve does not exist in South Africa using various measures of demand-side variable. These findings are robust across estimation methodologies as well as different measurements of inflation expectations and data frequency. While the findings indicated that economic agents in South Africa are both rational and adaptive in predicting inflation, the results clearly showed the dominance of forward looking component over the backward looking element in driving inflation. Secondly, given the focus of the South African monetary authority in maintaining stable inflation rates and the fact that monetary policy need to go hand-in-hand with other policies in order to ensure stable inflation and economic growth (Gruen, Pagan and Thompson, 1999), this study considered the expanded Gordon’s model with a particular focus on how fiscal policy determines the inflation process in South Africa. The purpose of the Gordon’s chapter is to verify the existence or non-existence of Phillips curve in an expanded model, within the context of an augmented “triangle” model while including the monetarist and fiscal side variables, thereby checking whether the PC relationship of recent studies is robust to model specification. Thus, the augmented Gordon’s model was estimated using a holistic approach of including the fiscalist, monetarist and the structuralist schools of thought, using the Vector autoregressive (VAR), vector error correction model (VECM) and innovation accounting techniques. The results confirm the non-existence of PC whereby output growth maintained a negative relationship with inflation rate, signifying no trade-off despite the expanded specification, while the results from output-gap model are inconclusive. Further results showed that the demand-side, fiscal factors and some of the structural variables contribute more to the inflation dynamics in South Africa. Thus the changes in inflation rate are as a result of changes in output growth, government deficit, electricity price and exchange rate. The results confirmed that the Fiscal Theory of the Price Level (FTPL) applies to the South African economy, whereby not only monetary policies should be considered in controlling inflation, but also fiscal policies. On the other hand, the importance of the determinants of inflation rate is not sufficient in observing the inflation dynamics in South Africa; therefore, this study concluded by investigating the level at which inflation becomes detrimental to output growth. In the context of the low levels of economic growth and high levels of unemployment in South Africa, the study analysed the output growth implications of the inflation targeting monetary policy of the South African Reserve Bank that targets an inflation band between three and six percent. Using the Threshold Autoregressive (TAR) and the Sample Splitting Threshold Regression (SSTR) techniques, this study investigated the nonlinear inflation-growth nexus in South Africa with the purpose of identifying the inflation rate band that optimize output growth. The results showed that South Africa is able to accommodate a higher level of inflation beyond the current inflation target band by increasing the band to between seven and nine percent in order to enhance output growth. Our findings support the argument of studies that indicate that moderately higher inflation rate will not be harmful to the economy.MT201

Challenges to admissions in the extended curriculum programme in the Faculty of Business and Management Sciences

The challenges that beset the ECP/FBMS (Extended Curriculum Programme/ Faculty of Business and Management Sciences) at the beginning of the year emanate mainly from the admissions and registration constraints. These constraints could however, be successfully addressed at faculty and institutional level. Of all the stakeholders, students and lecturers mainly bear the brunt of these challenges.Amongst the ECP students, there are two significant groups- those from the rural areas where technology is still lacking and those from townships where the technology is theoretically available but not always in practice. The great majority is faced with teachers who are not good enough; hence they all end up struggling to cope with university standards. A question naturally arises as to how the university responds to the continuous and prolific challenges of first year students.One approach that can be used to remedy the situation may lie in changes to the current admission policy that may better serve all students, both ECP and mainstream

Does the Repurchase Rate Affect Inflation in South Africa? An Empirical Analysis Using an Impulse Response Function

The repurchase rate (repo rate) is the most common monetary policy instrument that the South African Reserve Bank (SARB) uses to control inflation and endeavours to keep it within the inflation target band of 3% to 6%. This study examines the effect of the repo rate on inflation rate along with other variables using the Impulse-Response Function (IRF) of a Vector Autoregressive (VAR) technique. This study uses quarterly data spanning over the period 1980Q2 to 2013Q3. The response of a shock in repo rate on inflation rate and vice versa is generally positive. The results show that given one standard deviation shock in the repo rate, inflation rate will initially increase up until the second quarter after which it starts to decline, and increases again in the fifth quarter. The results obtained from the VAR granger causality test show that repo rate leads the gross domestic product (GDP) growth and inflation rate. There is bidirectional causality between inflation and repo rate; and the result is the same, even after structural break was accounted for. The VAR shows no evidence of instability and autocorrelation, hence the results are reliable. The study suggests some policy recommendations

Student progress and self-assessment in economics.

The study follows up on previous studies and provides insights into the factors that best explain student success in economics and appropriate pedagogic intervention such as self-assessment is suggested. Undergraduate third year economics students’ results are taken as the yardstick both for monetary and public economics. The findings suggest that the final marks of macro and microeconomics have a significant impact on the results of third year economics. Other factors such as assignment marks, module repeats, full or part-time studies and age also played a role. The results re-affirm the importance and influence of macro and microeconomics as base knowledge for undergraduate and future graduate work. Blended and e-learning interventions such as vodcasts were added as remedy and self-assessment is suggested to supplement assignments for future classes.Economic

The Financial crisis at historically Black universities in South Africa: An analysis of the policy debates with specific reference to the University of the Western Cape

Magister Administrationis - MAdminThe research is based on the Financial crisis of the Historically Black Universities as well as the access problems encountered by students from poor backgrounds. Furthermore the research highlights the problems encountered by these students once they are accepted into these universities for example, the inability to cope withe the high standards of sudying at these institutions as well as the problem of paying their fees. the thesis shows the history of university funding in South Africa with emphasis on the differentfunding formulas, dating back to the era of the Holloway funding formula as well as the Van Wyk de Vries report, the SAPSE funding formula and different other mechanisms up to the present funding formula. Views of different educationalists will also be dealt with in regard to the funding problems of university education in South Africa.South Afric

Impact of flipper-banding on breeding success of African penguins Spheniscus demersus at Robben Island: comparisons among silicone rubber bands, stainless-steel bands and no bands

From 2001 to 2006, two new designs of flipper bands made from silicone rubbers were tested on African penguins Spheniscus demersus at 365 nests on Robben Island, South Africa. We compared, over six years, the breeding success, from hatching to fledging, of three different groups of penguins: those with rubber bands (117 nests), with conventional stainless-steel bands (103 nests) and without bands (145 nests). There were no significant differences in breeding success between the three groups, suggesting that neither the currently used steel bands, nor either of the new rubber-band designs, were harmful during the seasons investigated. The rubber bands caused less wear of feathers and less drag on a model penguin than the steel bands. In captivity, the behaviours of African penguins fitted with rubber bands were not noticeably different to those of unbanded birds

POPULATIONS OF SURFACE-NESTING SEABIRDS AT MARION ISLAND, 1994/95–2002/03

During the 1990s and early 2000s, populations of surface-nesting seabirds at Marion Island showed different trends, but for the majority of species numbers decreased. Reduced numbers of gentoo penguins Pygoscelis papua, eastern rockhopper penguins Eudyptes chrysocome filholi, Crozet shags Phalacrocorax [atriceps] melanogenis and probably macaroni penguins E. chrysolophus are most plausibly attributed to an altered availability of food. Decreases in numbers of dark-mantled sooty albatrosses Phoebetria fusca, light-mantled sooty albatrosses P. palpebrata, southern giant petrels Macronectes giganteus and possibly northern giant petrels M. halli may have resulted from mortality of birds in longline fisheries. However, populations of wandering Diomedea exulans and grey-headed Thalassarche chrysostoma albatrosses fluctuated around a stable level. Numbers of Subantarctic skuas Catharacta antarctica and kelp gulls Larus dominicanus breeding at Marion Island also decreased. Kerguelen Sterna virgata and Antarctic S. vittata terns remain scarce at the island. Trends for king penguins Aptenodytes patagonicus were not reliably gauged, but numbers probably remained stable or increased. There were large fluctuations in numbers of king penguin chicks surviving to the end of winter.Afr. J. mar. Sci. 25: 427–44

Evaluating the effectiveness of service delivery : with special focus on Stellenbosch Municipality's water supply

Thesis (MPA)--Stellenbosch University, 2019.ENGLISH SUMMARY : Local government, which is the closest sphere of government to the people, serves to deliver services to the citizens as stipulated in the Constitution of the Republic of South Africa, Act 108 of 1996 and various legislations regulating local government. The delivery of effective, efficient and quality services in an equitable and sustainable manner has become a common challenge to numerous municipalities in South Africa (SA) due to poor governance, maladministration etc. The purpose of this study was to evaluate the effectiveness of service delivery at Stellenbosch Municipality, with water supply as the selected type of basic service for conducting this research project. The study was based on comparative analysis between Kayamandi Township and Rozendal suburb as the chosen areas of case study analysis. A qualitative study was conducted through an open-ended questionnaire as a data collection tool. The target number of 30 at Kayamandi was reached whereas only 18 participants at Rozendal participated. Sampling methods, particularly the probability and non-probability sampling methods were employed and participants were categorised in terms of their gender, age group, education level, employment and socioeconomic status. The study noted that the participation of females and adults dominated at Rozendal whereas in Kayamandi males dominated participation. Nonetheless, the participants in both areas participated being familiar with the nature of service delivery at local government level. The study found that the water supply at Stellenbosch Municipality is not bad except the problem of water shortage and water restriction measures based on high tariffs and penalties that negatively affected many citizens. Given this, the Municipality is recommended to come up with an effective solution towards water shortage and further deal with water restrictions in a way that does not negatively affect its citizens, particularly the less-privileged groups. One is of the view that water shortage and drought that affected Western Cape, including Stellenbosch, does not reflect incompetency on the part of the Municipality as these occurred as natural phenomenon. However, the Municipality still has responsibilities and constitutional mandate to provide the best possible services under any circumstances.AFRIKAANSE OPSOMMING : Plaaslike regering, wat op grondvlak die naaste vorm van regering aan die mense is, is daarvoor verantwoordelik om dienste aan die landsburgers te lewer soos bepaal in die Grondwet van die Republiek van Suid-Afrika, Wet 108 van 1996 en verskeie wetgewings wat plaaslike regerings reguleer. Die lewering van effektiewe, doeltreffende en kwaliteitsdienste op 'n billike en volhoubare wyse het 'n algemene uitdaging geword vir talle munisipaliteite in Suid-Afrika (SA) as gevolg van swak bestuur, wanadministrasie ens. Die doel van hierdie studie was om die doeltreffendheid van dienslewering te evalueer by die Stellenbosch Munisipaliteit, met watervoorsiening as die geselekteerde tipe basiese diens vir die navorsingdoeleindes. Die studie is gebaseer op vergelykende analise tussen Kayamandi Township en die Rozendal-buurt as die gekose gebiede vir die gevallestudie-analise. 'n Kwalitatiewe studie is gedoen deur middel van 'n oop vraelys as 'n data-insamelingsinstrument. Die teikengetal van 30 by Kayamandi is bereik terwyl slegs 18 persone by Rozendal deelgeneem het. Steekproefnemingsmetodes, veral waarskynlikheid en nie-waarskynlikheid Steekproefnemingsmetodes is gebruik en deelnemers is gekategoriseer in terme van hul geslag, ouderdomsgroep, onderwysvlak, indiensneming en sosio-ekonomiese status. Dit was opvallend dat die deelname van vroue en volwassenes by Rozendal oorheers het, terwyl in Kayamandi mans die deelname oorheers het. Nietemin was die deelnemers in beide gebiede vertroud met die aard van dienslewering op plaaslike regeringsvlak. Die studie het bevind dat die watervoorsiening by Stellenbosch Munisipaliteit redelik voldoende is, behalwe die probleem van die watertekort en waterbeperkingsmaatreëls wat gebaseer is op hoër tariewe en strawwe - iets wat baie burgers negatief beïnvloed het. Gevolglik word die Munisipaliteit aangeraai om 'n effektiewe oplossing vir ‘n watertekort te vind en voorts om waterbeperkings in te stel op 'n manier wat nie sy mense nadelig beïnvloed nie, veral die minderbevoorregte groepe. Die navorser is van mening dat die watertekort en die droogte wat Wes-Kaap beïnvloed het, insluitende Stellenbosch, nie te wyte is aan onbevoegdheid aan die kant van die Munisipaliteit nie, aangesien dit plaasgevind het as ‘n natuurlike verskynsel. Die Munisipaliteit het egter steeds verantwoordelikhede en 'n grondwetlike mandaat om onder alle omstandighede die beste moontlike dienste te lewer

Trade unions’ inflation expectations and the second-round effect in South Africa

Inflation expectations play a critical role in the formation of prices and wages. Hence, the South African Reserve Bank (SARB) reacts to inflation’s direct effects by tightening the monetary policy in order to avoid any second-round effects. The study we conducted attempts to investigate whether the inflation rate are led by inflation expectations or vice versa. We analyse quarterly data using the Toda-Yamamoto causality technique and three different measures of inflation expectations of the trade union representatives. We also investigate the role of the exchange rate in leading or lagging the inflation rate. Overall, the results obtained demonstrate that the inflation and the exchange rates have bidirectional causality, while unidirectional causality exists from the inflation rate to inflation expectations. We therefore conclude that a second-round effect of inflation cannot be induced by changes in the inflation expectations of the trade unions, and provide some policy recommendations