Browsing by Author "Mhloluvele, Nonkululeko"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    The impact of foreign capital inflow on domestic savings in South Africa
    (University if Fort Hare, 2017-06-30) Mhloluvele, Nonkululeko
    This study examined the impact of foreign capital inflow on domestic savings in South Africa􀀋. Data was extracted from the World Bank from 1990-2014. The study employed the Johansen co-integration technique to analyse the long run relationship between the variables of interest. Having established the presence of co-integration, the vector error correction model was also estimated to analyse the short run interaction between the variables. The long run results illustrated that there is a positive relationship between domestic savings and foreign direct investment, remittances and GDP per capita, while on the other hand there is a negative relationship between domestic savings, interest rate and ODA. Granger causality tests were also conducted and the results indicate that the different forms of external financial flows Granger cause savings in South Africa. What is interesting from the empirical results is the negative relationship between interest rate and domestic savings which implies that South Africans are net borrowers as the income effect surpasses the substitution effect. This in part explains the low levels of domestic savings being experienced by South Africa since an increase in interest rate results in people paying more debt and this will reduce domestic savings. In addition, the results also suggest that foreign capital flows complement savings in South Africa.