Savings and economic growth: a historical analysis of the relationship between savings and economic growth in the Cape Colony economy, 1850-1909

Abstract: The savings-development nexus is a topical issue in current development literature.No study has yet explored this relationship in nineteenth-century ‘SouthAfrican’ colonies. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding development trends in the twentieth century. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role of savings and financial sector development in the growing colonial economy. This paper describes and surveys the nature of financial markets in the Cape Colony between 1850 and 1909 and seeks to explain the relationship between savings and economic growth. Savings is defined in the broad sense of monetary and non-monetary savings and would be assumed to be a proxy for financial development in the Cape Colony. This paper contributes to the economic history literature on the colonial past of South Africa by using recently compiled data on the GDP (Greyling & Verhoef 2015) as well as monetary savings and non-monetary savings (livestock) to test whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth-century Cape Colony. The Johansen vector error correction model technique is applied to determine the relationship between savings and economic growth. It is found that despite the expectations in the literature that financial deepening contributes to economic growth, the Cape Colony did not display such causal relationship in the period under review

The Determinants Of Household Savings In South Africa: A Panel Data Approach

This study employs panel data estimation models to investigate the determinants of household savings in South Africa over the period 2008 – 2012. The novelty of some panel data models is their power to overcome the problems of endogeneity bias, in addition to controlling for unobserved heterogeneity across households. The study used the three waves of the new unique and rich first national representative longitudinal survey, the National Income Dynamics Study (NIDS), which tracks changes in individuals’ livelihoods over time. The distinctiveness of NIDS data is that it is available in a panel format and can be used to investigate the structure and impact of different aspects of socio-economic factors on household savings. The results of this study reveal that household savings in South Africa are strongly driven by income, age structure, education achievement and employment status. Yet the causal nexus between savings and the household size was found to be negative, a sign that larger families compromise households savings prospects.

SAVINGS and economic growth: a historical analysis of the relationship between savings and economic growth in the CAPE Colony economy, 1850-1909.

Abstract The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector

SAVINGS and economic growth: a historical analysis of the relationship between savings and economic growth in the CAPE Colony economy, 1850-1909.

Abstract The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector

The Nonlinear Dynamic Impact of Development-Inequality in the Prudential Policy Regime in Emerging Economies: A Bayesian Spatial Lag Panel Smooth Transition Regression Approach

A panel data analysis of the nonlinear dynamics of economic-development in a macroprudential policy regime was conducted in a panel of 25 emerging markets who were grouped together based on their regions: 10 African countries, 8 Asian countries, and 7 European countries covering the period 2000–2019. The paper explored the validity of the Kuznets hypothesis in a prudential policy regime as well as the threshold level at which economic-development reduces inequality, using the Bayesian Spatial Lag Panel Smooth Transition Regression model. This model was adopted due to its ability to address the problems of endogeneity, heterogeneity, and time and spatial-varying in a nonlinear framework. We found evidence of a non-linear effect between the two variables, where the threshold was found to be US$15,900, above which reduces inequality in the African emerging markets; while for emerging Asian and emerging European markets, we documented a U-shape relationship with an optimal level of economic-development estimated at US$17,078 and US$19,000, respectively. Unconventional and macroprudential policies were found to trigger development-inequality relationships. The result supported the S-curve relationship in these regions. Our evidence largely suggests that policymakers ought to formulate policies aiming at increasing agricultural productivity through land redistribution, investment, trade, and promoting human development. Policymakers should also be cautious when implementing macroprudential and unconventional monetary policies

'n Inflasiemodel vir Suid-Afrika

D.Com. (Economics)This study covers the possible causes of inflation in South Africa. Inflation is usually defined as a period of sustained increase in the general price level. The South African inflation rate has accelerated from a moderate start in the early 1960's, and has shown a persistent resistance to regain former levels ever since. This resistance called for an identification of the causes of inflation and for some light to be shed on the inflation process experienced in South Africa since 1965. The aim of the investigation was, firstly, to estimate an inflation function: and, secondly, to simulate the inflation rate. The study was carried out in two stages. In the first, a survey was carried out of all the applicable inflation theories. The conventional inflation theories, the quantity monetary theory and the demand-pull and cost-push theories were analysed. Consequently, the new inflation theories were discussed. The discussion starts off with an analysis of the Phillips curve, as interpreted by R. Lipsey, and the differentiation by Friedman and Phelps between the short-run and long-run Phillips curves, through to the criticism by the School of Rational Expectation

Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach

In response to the “Great Recession and Global Financial Crisis”, central banks had to deploy unconventional monetary policies (UMP) in order to fight the severe impact of the crisis. Therefore, the purpose of this study is to examine the dynamic shock of unconventional monetary policies through earning heterogeneity, income composition, and portfolio channels on income inequality in emerging economies covering the period 2000–2019, using the panel vector autoregressive (PVAR) model. A PVAR model was designed for this study because of its ability to address the dynamics of numerous entities considered in parallel. The findings suggest that the UMPs used by these countries’ central banks may have increased income inequality through all of the channels investigated in this study, as a shock to unconventional monetary policy results in a positive response in income inequality. Even when pre-tax income, held by the top 10%, is adopted to measure income inequality, the study yields similar results. It is evident that a central bank’s objective is and should be to fulfil its mandate of achieving maximum employment and price stability, thus bringing wide economic benefits. Thus, some forms of policies are more appropriate for addressing concerns about inequality (income policy or fiscal policy) than others. However, the current study alerts the central bank to the fact that monetary policies may have a wounding impact on income inequality. Therefore, the central banks should consider the cost of monetary policies on income inequality when drafting or implementing these kinds of policies

Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach

In response to the “Great Recession and Global Financial Crisis”, central banks had to deploy unconventional monetary policies (UMP) in order to fight the severe impact of the crisis. Therefore, the purpose of this study is to examine the dynamic shock of unconventional monetary policies through earning heterogeneity, income composition, and portfolio channels on income inequality in emerging economies covering the period 2000–2019, using the panel vector autoregressive (PVAR) model. A PVAR model was designed for this study because of its ability to address the dynamics of numerous entities considered in parallel. The findings suggest that the UMPs used by these countries’ central banks may have increased income inequality through all of the channels investigated in this study, as a shock to unconventional monetary policy results in a positive response in income inequality. Even when pre-tax income, held by the top 10%, is adopted to measure income inequality, the study yields similar results. It is evident that a central bank’s objective is and should be to fulfil its mandate of achieving maximum employment and price stability, thus bringing wide economic benefits. Thus, some forms of policies are more appropriate for addressing concerns about inequality (income policy or fiscal policy) than others. However, the current study alerts the central bank to the fact that monetary policies may have a wounding impact on income inequality. Therefore, the central banks should consider the cost of monetary policies on income inequality when drafting or implementing these kinds of policies

THE IMPACT OF POPULATION AGING ON THE SOUTH AFRICAN ECONOMY: A CASE OF THE KING CETSHWAYO DISTRICT MUNICIPALITY

Population aging presents numerous challenges, such as a reduced fiscal balance, changes in the savings patterns of households, and higher age dependency ratios. These consequences are evident for older individuals, the government, and the economy at large. This study examined the impact of population aging on the economic growth of South Africa, studying the King Cetshwayo District Municipality specifically. A panel data set for the period 2002-2020 by Quantec Easy Data was used for the study. A FE regression model was used to examine the relationship between economic growth (GDP per capita), population aging, savings, education, and other independent variables. The findings from the panel data analysis revealed that population aging negatively affects economic growth only in the short run but not in the long run. Also, other factors like education, savings, and income affected economic growth in the King Cetshwayo District Municipality. This study recommends a transformation in the country’s savings by educating the population about the importance of savings in order to improve GDP per capita and the economic wellbeing of the people