Population aging, unemployment and house prices in South Africa

Abstract: This paper examines the joint dynamics between house prices, population aging and unemployment in South Africa. It uses provincial level dataset to compare the demographic effects of house prices across different housing segments over the period from 1995 to 2015. When heterogeneity, endogeneity and spatial effects are controlled for, the analysis finds that on average in the past 22 years, population aging have contributed to the decline of the South African house prices by 6.28 and 7.52 basis point in the large and medium housing segments, respectively while the small segment has remained unaffected. Likewise, unemployment appears to have played a significant role in slowing down the growth rate of house prices across segments but to a lesser extent. While the response of real house prices to demographic shift is consistent with the life cycle hypothesis, the insensitivity of small house prices to aging might reveal the mitigating effect of the retirees’ relocation from larger segment houses to smaller ones. The relocation effect might induce higher demand of small segment houses which drives up their prices and offsets the detrimental effect of aging. These findings suggest that, increasing the incentive to prolong the retirement age or engage elderly population in other income generating activities to meet their increasing financial needs given the meagre social security system, is likely to sustain the growth prospective of housing value in South Africa

Stabilization of the Cauchy problem for integro-differential equations

In the present paper, we obtain a criterion for the stabilization of the Cauchy problem for an integro-differential equation in the class of functions of polynomial growth γ ≥ 0.Одержано критерій стабілізації задачі Коші для інтегро-диференціального рівняння у класі функцій з поліноміальним зростанням γ ≥ 0

Corruption's effect on BRICS countries' economic growth: a panel data analysis

Purpose: The theoretical debate of corruption's impact on economic growth remains unsettled, making it an empirical question. This study aims to investigate corruption's effect on BRICS countries' economic growth. Design/methodology/approach: A panel dataset on BRICS countries spanning 1996 to 2020 was used. Bias-corrected estimators in small dynamic panels were employed to estimate a growth model as a linear-quadratic function of corruption that accounts for cross-sectional dependence, endogeneity and unobserved heterogeneity due to country and time-specific characteristics. Findings: The results indicate that corruption is detrimental to economic growth in BRICS countries; the quadratic relationship implies corruption is less prevalent in some countries than others. Thus, governments of BRICS countries are encouraged to embark on anti-corruption policies to boost their economic performance. Originality/value: An important limitation of corruption studies is the difficulty in measuring real corruption experiences due to the secretive nature of corruption and the fact that corruption is known not to leave a paper trail. For the uncertainty of the index estimates, the analysis used a continuous corruption composite score measuring the standard deviation of the extent to which public power is exercised for public gain. Furthermore, estimation and inference are robust to small dynamic panels with a general form of cross-sectional dependence

Maternal education and child health outcomes in South Africa : a panel data analysis

Abstract: This study empirically assesses the relationship between mothers’ education and child health using continuous and binary proxies of child health outcomes. A panel, using four waves of the National Income Dynamic Study and a battery of estimation techniques, was employed. The results suggest that maternal education plays a large and significant role in explaining child health outcomes in South Africa. Our results also suggest that maternal education is relevant in respect to stunted growth (stunting). However, the effects of maternal education vary along races, implying levels of inequality. The effects are stronger in the black and coloured populations, possibly due to educational deficits. This suggests a need in improving the educational opportunities for these groups. We suggest that maternal education can significantly contribute to reducing the high degree of inequality in South Africa

House prices and fertility in South Africa: A spatial econometric analysis

In this paper, the effect of house prices on fertility is analysed across South African provinces using spatial Durbin model. This approach assumes spatial linkages through both endogenous and exogenous variables while allowing the total housing effect on fertility to be decomposed into direct and indirect effects. Empirical results using provincial annual data from 1998 to 2015 indicate that housing market plays an important role in the fertility decision besides female job participation and labour market condition. Particularly, an increase in regional house prices results in a decrease in local and subsequently national fertility rate. However, the spillover effect to adjacent provinces appears to be positive and significant, except in the small housing segment; suggesting that an increase in regional house prices will spur fertility in other regions. Intuitively, house price inflation in a province makes housing relatively affordable in adjacent regions; housing affordability being an important driver of fertility. Alternatively, this positive effect might also capture the income effect felt by homeowners following a rise in house prices, which might in turn be favourable to fertility due to financial edge. The insignificant indirect effect from the small housing segment might reflect the fact that small houses are less likely to be the family residential choice. These findings confirm the importance of spatiotemporal economic behavior in shaping regional fertility in South Africa

Essays on the determinants and spillovers of South African housing market

This study investigates the relevant factors that drive house prices in South Africa with the aim of facilitating a better understanding of the dynamic relationship between house prices and key macroeconomic variables. This can serve as a prerequisite to the ability of policymakers to maximize the positive externalities associated with housing development, while implementing measures to reduce the unexpected effects. The thesis consists of five independent papers corresponding to five chapters. The first chapter examines the economic sources underlying the comovement of real house prices across provinces in South Africa. First, a dynamic factor model is estimated on quarterly provincial-level data to disentangle the national component of real house price movements from the local (provincial or region-specific) component. Second, a Structural Vector Autoregressive (SVAR) model is applied to investigate the extent to which macroeconomic shocks are responsible to the common component of real house prices. Using theoretically motivated short run restrictions to identify macroeconomic with portfolio and monetary policy shocks playing greater roles. We also find evidence shocks, results indicate that comovement in real house prices is due to the combined effects of favourable and unfavourable structural shocks emanating from different sectors of the economy, of significant feedbacks from the housing sector to the real economy which theoretically channel through the wealth and /or collateral and balance sheet effects on consumption and investment, respectively. The second chapter implements a Panel Vector Autoregression (PVAR) approach on provincial level data to analyse the role of house prices in determining the dynamic behaviour of consumption. Unlike individual regression, this approach accounts for individual heterogeneities characteristic of provincial housing markets. Based on the standard recursive identification, we find that house prices exhibit an asymmetric effect on consumption: a positive shock to house price growth has a positive and significant effect on consumption, while the negative impact of an anticipated house price causes an insignificant reduction in consumption. Because consumption is a significant component of Gross Domestic Product (GDP), the effect of house prices on consumption serves as a key link between the housing market and economic activity. The third chapter, therefore, exploits panel time series methods to examine the impact of house price changes on economic growth across provinces. This framework offers a variety of tools designed to address econometric issues such as heterogeneity, endogeneity and spatial effects which have been found to be prominent in regional housing markets. Specifically, Fixed effect (FE) and Random coefficient (RC) models are used to address the issue of heterogeneity. The potential endogeneity is accounted for using SYSTEM-Generalised Method of Moments (SYS-GMM) while the Feasible Generalised Least Squared (FGLS) and the Seemingly Unrelated Regression (SUR) are used to control for spatial effects. Accounting for these above issues leads to a significant effect of house price changes on provincial economic growth in South Africa. Since house prices affect the business cycle, monetary policy might not be neutral to house price movements. Moreover, one may expect asymmetric response of monetary policy to house price shocks giving the boom/bust nature of house price dynamics. In light of these considerations, the fourth chapter links South African housing market dynamics to the interest rate setting behaviour by relying on Markov-Switching Vector Autoregressive (MS-VAR). This technique allows identifying the bull and bear regimes in the South African housing market and therefore helps examining asymmetries in the impact of monetary policy shocks on the house prices during bull and bear regimes. The impact of the monetary policy on house prices is found to be larger in the bear regime than in the bull regime; indicating the role of information asymmetry in reinforcing the financial constraint of economic agent. Unsurprisingly, monetary reaction to a positive house price shock is found to be stronger in the bull regime. This suggests that central banker are more concerned in bull regime given the potential crisis related to the subsequent bust in house prices bubbles which are more prominent in bull markets. Finally, changes in house prices induce an adjustment of consumption and investment decisions which could be reflected as a trade surplus or deficit. The fifth chapter characterises the dynamic relationship between house prices and the trade balance based on a Bayesian Vector Autoregressive (BVAR) approach with sign restrictions. The results indicate that 1 percent decline in house prices can improve the trade balance by 0.2 percent; suggesting that house prices represent an additional instrument for trade-balance adjustment besides the traditional exchange rate channel. Further, we find that the contribution of house price shocks to the historical path of the trade balance is less prominent in 2000s; possibly substantiating the effectiveness in the conduct of South African monetary policy, which has been shown to be incorporating house price movements in its interest rate setting behaviour.Thesis (PhD)--University of Pretoria, 2013.http://hdl.handle.net/2263/31859hb2013Economicsunrestricte

The role of financial conditions in transmitting external shocks onto South Africa

Abstract: This paper analyses the spillover effects of external financial conditions onto South Africa using quarterly domestic and international data from 1996Q1 to 2014Q4. First, principal component analysis and vector autoregressive model are utilized to build financial conditions indices for South Africa and its main trading partners, namely, China, Germany, the United States, Japan, the United King, Netherlands, Italy, France and Belgium. Consistently across both methodologies, the financial conditions indices obtained track each other fairly well and capture the 2008/09 global financial crisis. Second, a Global Vector Autoregressive model comprised of financial indices and other macroeconomic variables is implemented to assess how international financial shocks spillover into South Africa. Our findings show that a sudden tightening of the US financial conditions has a significant but short lived effect on the South Africa’s real GDP growth while the spillover effects from other trading partners appear to be of negligible impact throughout the sample period

Effect of marine protected areas and macroeconomic environment on meat consumption in SEAFO countries

Abstract: Livestock production and consumption of meat are significant contributors to today’s most serious environmental problems and global warming. This paper investigates the role of marine reserves in shaping meat consumption pattern across member countries of the South East Atlantic Fisheries Organisation (SEAFO) for the period 1990 to 2009. Using a panel data including economic factors, life expectancy and environmental awareness, we find that meat consumption is positively associated with the presence of marine protected areas (MPAs). This suggests a possible increase in substitution of meat eating to seafood by SEAFO member countries due to aquatic resources conservation. Marine resource conservation policy is not a complementary strategy for sustainable livestock policy. This points out to some necessary policy improvements and actions to ameliorate the relationship between MPA and the negative environmental impacts of livestock. Furthermore, economic factors appear to have played a significant role in explaining meat consumption growth. Apart from price inflation, the most relevant factors that positively influence meat consumption appear to be GDP, exports and imports of agricultural products, and urbanisation. Beyond economic factors, negative health information associated with meat consumption appear to lead to a reduction in the consumed quantities of meat. There is evidence that meat-eating behaviour is not only related to macroeconomic development but also to environmental awareness

Inflation and output growth dynamics in South Africa: Evidence from the Markov switching vector auto-regression model

This paper introduces the possibility of asymmetry in the relationship between output growth and inflation in South Africa based on signal extraction model. The Markov-switching vector autoregression is used to this end. The results of the empirical analysis show that, consistent with the attenuation principle, the response of output growth to inflation shocks is asymmetric and depends on inflation volatility regimes and the magnitude of the monetary policy reaction to inflation shocks