Exchange rates and economic growth in emerging economies: the case of South Africa
- Authors: Sibanda, Bornapart
- Date: 2012
- Subjects: Economic development , Currency convertibility -- South Africa , Foreign exchange -- South Africa , Foreign exchange rates -- South Africa , Foreign exchange administration -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11464 , http://hdl.handle.net/10353/d1007045 , Economic development , Currency convertibility -- South Africa , Foreign exchange -- South Africa , Foreign exchange rates -- South Africa , Foreign exchange administration -- South Africa , South Africa -- Economic conditions
- Description: This study examines the impact of exchange rate volatility and misalignment on economic growth in South Africa. It applies the Johansen co integration test and the vector error correction model on quarterly data for the period 1990:01-2010:04. Exchange rate volatility is measured as the standard deviation of both the nominal and nominal effective exchange rate. The study constructs three measures of exchange rate misalignment, with two of the measures constructed using the Producer Price Index and Consumer Price index based Purchasing Power Parity. The third measure was based on the difference between the nominal and effective exchange rate. Contrary to pre-dominant findings in the exchange rate literature, the study finds a positive and significant relationship between exchange rate volatility and economic growth and attributes it to composition of the country’s exports that are largely made up of commodities that act as essential inputs in many production processes. As a result, the variability of prices caused by exchange rate volatility is not expected to deter demand for these commodities. A negative and significant relationship between exchange rate misalignment and economic growth was found. The findings of the study show that it is important for monetary authorities to ensure that the exchange rate is always at an appropriate level in order to avoid the negative implications of exchange rate misalignment on economic growth.
- Full Text:
- Date Issued: 2012
- Authors: Sibanda, Bornapart
- Date: 2012
- Subjects: Economic development , Currency convertibility -- South Africa , Foreign exchange -- South Africa , Foreign exchange rates -- South Africa , Foreign exchange administration -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11464 , http://hdl.handle.net/10353/d1007045 , Economic development , Currency convertibility -- South Africa , Foreign exchange -- South Africa , Foreign exchange rates -- South Africa , Foreign exchange administration -- South Africa , South Africa -- Economic conditions
- Description: This study examines the impact of exchange rate volatility and misalignment on economic growth in South Africa. It applies the Johansen co integration test and the vector error correction model on quarterly data for the period 1990:01-2010:04. Exchange rate volatility is measured as the standard deviation of both the nominal and nominal effective exchange rate. The study constructs three measures of exchange rate misalignment, with two of the measures constructed using the Producer Price Index and Consumer Price index based Purchasing Power Parity. The third measure was based on the difference between the nominal and effective exchange rate. Contrary to pre-dominant findings in the exchange rate literature, the study finds a positive and significant relationship between exchange rate volatility and economic growth and attributes it to composition of the country’s exports that are largely made up of commodities that act as essential inputs in many production processes. As a result, the variability of prices caused by exchange rate volatility is not expected to deter demand for these commodities. A negative and significant relationship between exchange rate misalignment and economic growth was found. The findings of the study show that it is important for monetary authorities to ensure that the exchange rate is always at an appropriate level in order to avoid the negative implications of exchange rate misalignment on economic growth.
- Full Text:
- Date Issued: 2012
The impact of capital flows on real exchange rates in South Africa
- Authors: Mishi, Syden
- Date: 2012
- Subjects: Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11466 , http://hdl.handle.net/10353/d1007089 , Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Description: The neoclassical theory suggests that free flows of external capital should be equilibrating and thereby facilitating smoothening of an economy's consumption or production patterns. South Africa has a very low savings rate, making it highly dependent on capital inflows which create instability and volatility in global markets. A policy dilemma is undoubtedly evident: capital inflows help to cater for the domestic low savings and at the same time the inflows pose instability, a threat on competitiveness and volatility challenges to the same economy due to their impact on exchange rates. The question is: are all forms of capital flows equally destabilizing? Since studies based on South Africa considered only the relationship between aggregate capital flows and real exchange rate, modelling individual components of capital flows could enlighten policy formulation even further. The composition of the flows and their effects on the composition of aggregate demand determine the evolution of real exchange rate response to surges in capital flows. Through co-integration and vector error correction modelling techniques applied to South African data between 1990 and 2010, the study found out that foreign portfolio investment exerts the greatest appreciation effect on the South African real exchange rate, followed by other investment and finally foreign direct investment. Thus the impact of capital flows on real exchange rate in South Africa differs by type of capital. This presents varied policy implications.
- Full Text:
- Date Issued: 2012
- Authors: Mishi, Syden
- Date: 2012
- Subjects: Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11466 , http://hdl.handle.net/10353/d1007089 , Capital movements -- South Africa , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Currency question -- South Africa , Saving and investment -- South Africa , Free trade -- South Africa , Anti-inflationary policies -- South Africa , Cointegration -- South Africa
- Description: The neoclassical theory suggests that free flows of external capital should be equilibrating and thereby facilitating smoothening of an economy's consumption or production patterns. South Africa has a very low savings rate, making it highly dependent on capital inflows which create instability and volatility in global markets. A policy dilemma is undoubtedly evident: capital inflows help to cater for the domestic low savings and at the same time the inflows pose instability, a threat on competitiveness and volatility challenges to the same economy due to their impact on exchange rates. The question is: are all forms of capital flows equally destabilizing? Since studies based on South Africa considered only the relationship between aggregate capital flows and real exchange rate, modelling individual components of capital flows could enlighten policy formulation even further. The composition of the flows and their effects on the composition of aggregate demand determine the evolution of real exchange rate response to surges in capital flows. Through co-integration and vector error correction modelling techniques applied to South African data between 1990 and 2010, the study found out that foreign portfolio investment exerts the greatest appreciation effect on the South African real exchange rate, followed by other investment and finally foreign direct investment. Thus the impact of capital flows on real exchange rate in South Africa differs by type of capital. This presents varied policy implications.
- Full Text:
- Date Issued: 2012
The impact of real exchange rates on economic growth: a case study of South Africa
- Authors: Sibanda, Kin
- Date: 2012
- Subjects: Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Money supply -- South Africa , Free trade -- South Africa , Saving and investment -- South Africa , Devaluation of currency -- South Africa , Currency question -- South Africa , South Africa -- Economic policy
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11469 , http://hdl.handle.net/10353/d1007129 , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Money supply -- South Africa , Free trade -- South Africa , Saving and investment -- South Africa , Devaluation of currency -- South Africa , Currency question -- South Africa , South Africa -- Economic policy
- Description: This study examined the impact of real exchange rates on economic growth in South Africa. The study used quarterly time series data for the period of 1994 to 2010. The Johansen cointegration and vector error correction model was used to determine the impact of real exchange on economic growth in South Africa. The explanatory variables in this study were real exchange rates, real interest rates, money supply, trade openness and gross fixed capital formation. Results from this study revealed that real exchange rates, gross fixed capital formation and real interest rates have a positive long run impact on economic growth, while money supply and trade openness have a negative long run impact on economic growth in South Africa. From the regression results, it was noted that undervaluation of the currency significantly hampers growth in the long run, whilst it significantly enhances economic growth in the short run. As such, the policy of depreciating the exchange rates to achieve higher growth rates is only effective in the short run and is not sustainable in the long run. Based on the findings of this study, the researcher recommended that misalignment (overvaluation and undervaluation) of the currency should be avoided at all costs. In addition, the results of the study showed that interest rates also have a significant impact on growth and since interest rates have a bearing on the exchange rate, it was recommended that the current monetary policy in South Africa should be maintained.
- Full Text:
- Date Issued: 2012
- Authors: Sibanda, Kin
- Date: 2012
- Subjects: Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Money supply -- South Africa , Free trade -- South Africa , Saving and investment -- South Africa , Devaluation of currency -- South Africa , Currency question -- South Africa , South Africa -- Economic policy
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11469 , http://hdl.handle.net/10353/d1007129 , Economic development -- South Africa , Foreign exchange -- South Africa , Interest rates -- South Africa , Money supply -- South Africa , Free trade -- South Africa , Saving and investment -- South Africa , Devaluation of currency -- South Africa , Currency question -- South Africa , South Africa -- Economic policy
- Description: This study examined the impact of real exchange rates on economic growth in South Africa. The study used quarterly time series data for the period of 1994 to 2010. The Johansen cointegration and vector error correction model was used to determine the impact of real exchange on economic growth in South Africa. The explanatory variables in this study were real exchange rates, real interest rates, money supply, trade openness and gross fixed capital formation. Results from this study revealed that real exchange rates, gross fixed capital formation and real interest rates have a positive long run impact on economic growth, while money supply and trade openness have a negative long run impact on economic growth in South Africa. From the regression results, it was noted that undervaluation of the currency significantly hampers growth in the long run, whilst it significantly enhances economic growth in the short run. As such, the policy of depreciating the exchange rates to achieve higher growth rates is only effective in the short run and is not sustainable in the long run. Based on the findings of this study, the researcher recommended that misalignment (overvaluation and undervaluation) of the currency should be avoided at all costs. In addition, the results of the study showed that interest rates also have a significant impact on growth and since interest rates have a bearing on the exchange rate, it was recommended that the current monetary policy in South Africa should be maintained.
- Full Text:
- Date Issued: 2012
The role of export diversification on economic growth in South Africa: 1980 - 2010
- Authors: Mudenda, Caroline
- Date: 2012
- Subjects: Economic development -- South Africa , International trade , Exports -- South Africa , Capital movements -- South Africa , Human capital -- South Africa , Free trade -- South Africa , Foreign exchange -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11463 , http://hdl.handle.net/10353/d1007044 , Economic development -- South Africa , International trade , Exports -- South Africa , Capital movements -- South Africa , Human capital -- South Africa , Free trade -- South Africa , Foreign exchange -- South Africa , South Africa -- Economic conditions
- Description: This study examined the role of export diversification on economic growth in South Africa. The study used annual time series data for the period covering 1980 to 2010 and employed a Vector Error Correction Model to determine the effects of export diversification and possible factors that affect it on economic growth. Possible factors that affect export diversification considered as independent variables in this study include gross capital formation, human capital, real effective exchange rate and trade openness. Results of the study reveal that export diversification and trade openness are positively related to economic growth while real effective exchange rate, capital formation and human capital have negative long run relationships with economic growth. The study recommended the continual implementation of trade liberalisation by the South African government. The South African government is also encouraged to promote the production of a diversified export basket through subsidisation, promotion of innovation and production of new products.
- Full Text:
- Date Issued: 2012
- Authors: Mudenda, Caroline
- Date: 2012
- Subjects: Economic development -- South Africa , International trade , Exports -- South Africa , Capital movements -- South Africa , Human capital -- South Africa , Free trade -- South Africa , Foreign exchange -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11463 , http://hdl.handle.net/10353/d1007044 , Economic development -- South Africa , International trade , Exports -- South Africa , Capital movements -- South Africa , Human capital -- South Africa , Free trade -- South Africa , Foreign exchange -- South Africa , South Africa -- Economic conditions
- Description: This study examined the role of export diversification on economic growth in South Africa. The study used annual time series data for the period covering 1980 to 2010 and employed a Vector Error Correction Model to determine the effects of export diversification and possible factors that affect it on economic growth. Possible factors that affect export diversification considered as independent variables in this study include gross capital formation, human capital, real effective exchange rate and trade openness. Results of the study reveal that export diversification and trade openness are positively related to economic growth while real effective exchange rate, capital formation and human capital have negative long run relationships with economic growth. The study recommended the continual implementation of trade liberalisation by the South African government. The South African government is also encouraged to promote the production of a diversified export basket through subsidisation, promotion of innovation and production of new products.
- Full Text:
- Date Issued: 2012
The legal and regulatory aspects of international remittances within the SADC region
- Authors: Mbalekwa, Simbarashe
- Date: 2011
- Subjects: Emigrant remittances -- South Africa , Foreign exchange -- South Africa , Finance -- Government policy -- Developing countries , Transfer payments -- Developing countries
- Language: English
- Type: Thesis , Masters , LLM
- Identifier: vital:10210 , http://hdl.handle.net/10948/d1006368 , Emigrant remittances -- South Africa , Foreign exchange -- South Africa , Finance -- Government policy -- Developing countries , Transfer payments -- Developing countries
- Description: Migrant labourers who cross borders often have to send money back to their various countries of origin. These monetary transfers are known as remittances. To send these funds migrants often opt to rely on informal mechanisms as opposed to the remittance services of formal financial institutions such as banks. Informal remittance mechanisms raise a number of concerns such as those related to consumer protection. In contrast to formal channels informal channels are not based on any legally binding agreements. They are highly based on trust and do not offer any legally binding guarantee that the funds will be delivered or that the remitter will be reimbursed in the event of non-delivery. Aside from consumer protection concerns, informal remittances also raise security related concerns. These channels are not subject to the supervision of any regulatory authority and usually offer a high level of anonymity. They can act as an attractive mechanism for terrorists and criminal organisations to launder and mobilise their illicit funds. Taking into mind the concerns mentioned above, as well as others, it would be preferable for more remittances to be channeled through formal financial mechanisms. In conducting research on remittance transactions financial, as well as other institutions and organisations, have outlined legal and regulatory provisions in sending and recipient countries as being a factor that often hinders migrants from accessing formal financial services. This dissertation examines how the South African legal and regulatory framework affects the formalisation of remittances by migrant labourers, with a focus on the context of low-income migrants. The study identifies the Exchange control, immigration, anti-money laundering and anti-terrorism legislative provisions as being the most significant provisions that affect the formalisation of migrant remittances. So as to make an analysis and gather recommendations were possible, a comparison of the South African legal and regulatory provisions is made to those of Zambia and Zimbabwe. The dissertation comes to the conclusion that South African legal and regulatory provisions hinder the formalisation of migrant remittances to a certain extent. They do so by collectively and individually restricting migrants who do not fulfill legislative requisites from accessing formal remittance channels. It is submitted that such migrants are inclined to rely on informal remittance mechanisms when the need to send money arises. Furthermore, South African law restricts competition within the remittance market by making it difficult for service providers to enter the market. The lack of an adequate competitive level fosters the prevalence of high remittance costs which can pose a significant barrier to low income migrants that wish to channel funds via formal means. Taking into mind the significance of formalising remittances as well as the objectives that the laws that hinder them seek to attain, which are equally significant, it is necessary for the regulatory authorities to investigate ways on how to possibly cater for both. It is submitted that if more remittances were to be channeled through official means the objectives sought to be attained by some of these legislative provisions would be attained more efficiently.
- Full Text:
- Date Issued: 2011
- Authors: Mbalekwa, Simbarashe
- Date: 2011
- Subjects: Emigrant remittances -- South Africa , Foreign exchange -- South Africa , Finance -- Government policy -- Developing countries , Transfer payments -- Developing countries
- Language: English
- Type: Thesis , Masters , LLM
- Identifier: vital:10210 , http://hdl.handle.net/10948/d1006368 , Emigrant remittances -- South Africa , Foreign exchange -- South Africa , Finance -- Government policy -- Developing countries , Transfer payments -- Developing countries
- Description: Migrant labourers who cross borders often have to send money back to their various countries of origin. These monetary transfers are known as remittances. To send these funds migrants often opt to rely on informal mechanisms as opposed to the remittance services of formal financial institutions such as banks. Informal remittance mechanisms raise a number of concerns such as those related to consumer protection. In contrast to formal channels informal channels are not based on any legally binding agreements. They are highly based on trust and do not offer any legally binding guarantee that the funds will be delivered or that the remitter will be reimbursed in the event of non-delivery. Aside from consumer protection concerns, informal remittances also raise security related concerns. These channels are not subject to the supervision of any regulatory authority and usually offer a high level of anonymity. They can act as an attractive mechanism for terrorists and criminal organisations to launder and mobilise their illicit funds. Taking into mind the concerns mentioned above, as well as others, it would be preferable for more remittances to be channeled through formal financial mechanisms. In conducting research on remittance transactions financial, as well as other institutions and organisations, have outlined legal and regulatory provisions in sending and recipient countries as being a factor that often hinders migrants from accessing formal financial services. This dissertation examines how the South African legal and regulatory framework affects the formalisation of remittances by migrant labourers, with a focus on the context of low-income migrants. The study identifies the Exchange control, immigration, anti-money laundering and anti-terrorism legislative provisions as being the most significant provisions that affect the formalisation of migrant remittances. So as to make an analysis and gather recommendations were possible, a comparison of the South African legal and regulatory provisions is made to those of Zambia and Zimbabwe. The dissertation comes to the conclusion that South African legal and regulatory provisions hinder the formalisation of migrant remittances to a certain extent. They do so by collectively and individually restricting migrants who do not fulfill legislative requisites from accessing formal remittance channels. It is submitted that such migrants are inclined to rely on informal remittance mechanisms when the need to send money arises. Furthermore, South African law restricts competition within the remittance market by making it difficult for service providers to enter the market. The lack of an adequate competitive level fosters the prevalence of high remittance costs which can pose a significant barrier to low income migrants that wish to channel funds via formal means. Taking into mind the significance of formalising remittances as well as the objectives that the laws that hinder them seek to attain, which are equally significant, it is necessary for the regulatory authorities to investigate ways on how to possibly cater for both. It is submitted that if more remittances were to be channeled through official means the objectives sought to be attained by some of these legislative provisions would be attained more efficiently.
- Full Text:
- Date Issued: 2011
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