Department of Economics

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Browsing Department of Economics by Subject "Economic stabilization -- South Africa"

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    Dynamic interactions between stock markets and banks in South Africa : testing for market disciplining of banks
    (University of Fort Hare, 2015) Syden, Mishi
    Literature on the significance of vibrant financial system is vast and conclusive, more so on the need for strong banking system for sustainable inclusive growth. This study take cognisant of such literature and explores the possible links between stock markets and banking system, with emphasis on testing the presence of market disciplining of banks. The study analysed South African individual bank panel data for the period 1994-2014. The study makes the following contributions: testing of market discipline of banks by stock markets in a developing economy, albeit this new strand in banking sector research has been fairly a preserve for developed countries across literature; testing stock market channel of monetary policy transmission in South Africa; exploring robust estimations to mitigate downfalls with short and unbalanced panels; controlling for financial crisis as well as covering a period of Basel II & III which emphasizes market discipline as a third pillar. The role of stock market discipline in aiding regulators and supervisors in ensuring efficiency and stability of the banking system is phenomenal internationally as seen by the recognition in Basel II & III, however its effectiveness has not been empirically tested in developing countries like South Africa. Diverse panel data estimation techniques producing robust/ corrected standard errors have been employed on the data making use of STATA 13. The study also made use on Pooled Mean Group estimates as well as dynamic fixed effects for robustness checks. The empirical results indicate that indeed stock market indicators are omitted variables in the traditional bank lending channel model and that the specified stock market channel model has no omitted variables. The presence of a stock market channel of monetary policy transmission in South Africa is established and thus vindicating the appropriate intermediate target for the central bank to be price level (inflation), with price stability being the ultimate goal. Furthermore the results point to the ability of stock markets to monitor and influence the banks (market discipline of banks) as indeed stock markets have been found to be significantly linked to banks’ operations as being information aggregator and provider. The results have varied implications for policy and further research.
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    The impact of oil price volatility on economic growth in South Africa : a cointegration approach
    (University of Fort Hare, 2013) Matekenya, Weliswa; Hompashe, D
    Oil is an essential commodity in the South African economy and a source of energy that is used for electricity generation, heating, and cooking. It is vital for the transportation system on which the very livelihood of the economy depends. 14% of South African primary energy needs are met by oil while 95% of crude oil is imported, primarily, from Saudi Arabia and Iran. This study investigates the impact of oil price volatility on economic growth in South Africa from 1994Q1-2010Q4. The study employs the VECM and shows that there exists both a long run and short run relationship between the following variables: crude oil price, GDP, gross fixed investment, real interest rate and real exchange rate. In a long-run analysis there is a positive relationship between oil price and GDP while there is negative relationship in the short-run. The study also shows that, as an oil importing country, South Africa‟s economic growth depends on imported oil which makes the country vulnerable to oil price shocks. Based on the findings of this study it is recommended that policy interventions should include both monetary and fiscal policies. It is in this regard that promoting a regional integration in order to reduce oil dependence, by optimizing electricity supplies across the region, is essential. This will improve efficiency and, owing to economies of scale, lower generation costs.