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Impact of Fiscal Consolidation on Government Debt in South Africa: Evidence to Structural and Cyclical Effect
Get PDFThe purpose of this paper is to examine the fiscal consolidation impact on government debt in South Africa (SA) looking at both structural and cyclical effects. The paper employs the Structural Vector Autoregression (SVAR) using time-series data from 1990 to 2020 in South Africa. The key contribution of the paper is it with a focus on the effect of fiscal consolidation as well as investigation of the structural and cyclical component effect of government expenditure cut as well as a tax increase in a developing economy like South Africa. We found that government debt falls as of the result of fiscal consolidation achieved through government expenditure cut. The fiscal consolidation of tax increases is better than based on government expenditure cut. The cyclical component of government expenditure increases domestic government debt. This is also found in the structural government expenditure results in an increase in domestic government debt
Evaluating the Effects of Inflation on Economic Growth in South Africa
Get PDFThis study investigates interaction between inflation and economic growth in South Africa during 1970-2021 periods. Utilizing Autoregressive Distributed Lag (ARDL) model, it finds that inflation, long-term interest rate and money supply have negatively impact on South African economic growth.
Furthermore, the study conducts causality tests which reveal a bidirectional relationship between money supply and South African economic growth. On the other hand, it documents a unidirectional causality running from inflation to economic growth and from long-term interest rate to economic growth. The study found no causal relationship between real effective exchange rate and South African economic growth. As a result, the study recommends a more aggressive inflation targeting policy in order to improve economic growth in South Africa
Health Expenditure and Infant Mortality in Sub Saharan Africa: Evidence from Threshold Regression
Get PDFThis study aims to determine the impact of healthcare spending on infant mortality rates in 45 sub-Saharan African nations from 2000 to 2020. Utilizing threshold regression, it reveals that lower regime dependents exhibit a decrease in public health spending below a certain threshold, leading to a positive correlation between total public health expenditure and infant mortality rates. Conversely, external medical funding significantly reduces infant mortality in higher threshold regimes but not in lower threshold regimes.
Private health expenditure negatively and significantly impacts both lower and higher income groups, placing undue pressure on residents. However, the study does not fully account for sociocultural factors influencing infant mortality in the region. The research highlights that direct healthcare costs in the region meet the minimum threshold for health expenditure and are inversely related to infant mortality rates
Spillover Volatility Effect Return Of Stock, Gold, and Cryptocurrency: Evidence of Peak Pandemic and Transition towards Endemic COVID-19 in Indonesia
Get PDFThis study examines the volatility spillover effects among stock, gold, and cryptocurrency returns during the peak of the COVID-19 pandemic and the transition to the endemic phase. The objective is to identify and model the volatility of these three investment instruments using GARCH/EGARCH for univariate modeling and BEKK-GARCH/BEKK-Asymmetric GARCH for multivariate modeling.
The study utilizes daily highest price data from November 1, 2020, to April 30, 2022, and from May 1, 2022, to December 31, 2022. The findings reveal that cryptocurrency is the most volatile asset during both the peak of the pandemic and the transitional period towards endemic COVID-19. Gold serves as a safe haven for cryptocurrency in both periods. Additionally, gold acts as a diversifier for stocks, and vice versa, while stocks also diversify cryptocurrency risk during the pandemic peak. These insights hold significant implications for portfolio risk management, enabling investors to diversify portfolios across instruments with varying risk profiles
The Effect of Disaggregated Country Risk on the Returns of the South African Exchange Traded Fund Market
Get PDFIn recent years, investors have drifted towards investments in emerging markets with better risk-return trade-offs, however, these markets are generally characterized by high political, financial, and economic risk. Given the rising popularity of Exchange Traded Funds (ETFs), the objective of this study is to investigate the effect of disaggregated country risk on the returns of the South African ETF market. The study utilises a sample of South African ETFs which are segregated based on their benchmarking strategy (that is, purely domestic benchmarks or international benchmarks), and the sample period ranges from the inception of the first ETF in the respective market till December 2019. A linear and non-linear Autoregressive Distributed Lag (ARDL) approach is used to explore the long- and short-run effects; however, the findings of this study suggest that country risk shocks have significant asymmetric effects on returns. Further analysis suggests that, in the long-run, ETFs with domestic benchmarks are most sensitive to political risk decreases whilst ETFs with international benchmarks are most sensitive to political risk increases. In the short-run, ETFs with domestic benchmarks are only influenced by political and financial shocks whilst all country risk components impact ETFs with international benchmarks. Overall, these findings can assist investors, rating agencies, multi-national enterprises, and policymakers in understanding the effects of country risk components on ETF markets
Commercial Bank Credit and Agricultural Growth Outcomes in Nigeria: An Empirical Analysis
Get PDFThis study investigates the impact of commercial bank loans on agricultural growth outcomes in Nigeria. It uses Augmented Dickey Fuller unit root test in order to examine stationarity of model input variables, documenting that all variables were stationary either at levels I(0) or at first difference I(1). The study then employed the ARDL model and Error Correction Model to estimate the long-run and short-run effects of the variables. The long-run model results showed that commercial bank credit and government expenditure had a positive relationship with agricultural output, while exchange rate had a negative effect. The error correction model results revealed that government expenditure had a positive relationship with agricultural growth outcomes, while exchange rate and interest rates had a negative effect.
In conclusion, the research found that commercial bank credit had a significant positive effect on agricultural growth outcomes in Nigeria, and recommended that commercial banks' lending policies and procedures should be flexible to accommodate more farmers. The results also imply that the government should provide adequate funds for the agricultural sector, specifically increasing its financial grants to small-scale farmers, to promote agricultural output and economic growth in the country
Examining the Dynamic Nexus of Monetary and Fiscal Policy in South Africa: Evidence from Key Macroeconomic Economic Indicators
Get PDFThis paper examines the dynamic nexus of monetary and fiscal policy in South Africa with evidence from key macroeconomic economic indicators from 2000 quarter 1 to 2022 quarter 3. The Markov-switching dynamic regression is used in the Taylor theoretical framework. The contemplation is what type of monetary and fiscal policy mix in a different state of policy rate or repo rate. There is less attention to the analysis of the impact of fiscal policy macroeconomic variables in a different state of policy rate with the consideration of the lower bound and upper bound rate of inflation. The South Africa Reserve Bank's reaction to fiscal policy macroeconomic variables is significant in different states. Moreover, there is evidence of constant reaction of the South Africa Reserve Bank when inflation is at the lower and upper bound. The increase in the gross domestic product gap and inflation gap results in an increase in the rope rate. The result suggests that the monetary policy provided a supportive policy to fiscal policy macroeconomic variables. However, there is a state that reflects trade-offs in the current monetary and fiscal policy mix reaction. The fiscal policy needs to be adjusted to attain the desired target
South African Taxpayers Perceptions towards E-Filing
Get PDFThe study has two parts: the first part studies how South African taxpayers felt about e-filing, and the second part analyses how e-filing affected tax compliance. We use self-structured questionnaires to collect data from about 151 South African taxpayers, and we analyze them using binary logistic regression. The study finds that online tax registration and auto-assessment has a negative relationship with tax compliance in South Africa, while online payment methods, difficulty in tax evasion, and higher educational attainment have a positive association with tax compliance. The study also finds that the extent to which the e-filing system encourages taxpayers to become compliant has a positive and statistically significant relationship with tax compliance. Overall, the study suggests that the development of e-filing has a positive impact on taxpayers' perceptions in South Africa and significantly increases voluntary tax compliance. To maximize the benefits of e-filing, it is important to ensure that taxpayers have access to the necessary technology and knowledge to use it effectively
The Spill-Over Effects of Cryptocurrencies on Equity and Bonds Market
Get PDFThis study examines the extent to which crypto assets have moved to the mainstream by estimating the potential for spillovers crypto on bond and equity markets using daily data on price volatility and returns. The analysis reveals that the coefficients of the constant variance term, the ARCH and the GARCH parameters are positive and statistically significant at the 1% level across all models. In respect of the mean equation, the results suggest that the spill-over effects of bitcoin on equities and long-term bonds are ambiguous. Spillovers from price volatility of the oldest and most popular crypto asset, Bitcoin, to the S&P 500 and MSCI emerging markets indices have increased by about 12-16 percentage points since the onset of the COVID-19 pandemic, while those from its returns have increased by about 8-10 percentage points. This clearly indicates that the persistence of volatility shocks, as represented by the sum of the ARCH and GARCH parameter is large. Moreover, this suggests that the effect of today’s shock remains in the forecasts of variance for many periods in the future
Institutional Shareholders' Monitoring Intensity and Executive Remuneration in South Africa
Get PDFThis study investigates the effect of distraction measures as a proxy for the intensity of institutional shareholders' monitoring responsibility regarding corporate executive remuneration in the South African context. We employ the more robust Generalised Method of Moments (GMM) estimation approach to analyse the data from firms listed on the Johannesburg Stock Exchange (JSE) covering the period 2004-2019. The results show that distraction has a significant positive impact on corporate executive remuneration. Hence, when institutional shareholders’ attention shifts due to distraction, monitoring control is relaxed, and corporate executive officers manipulate remuneration to their advantage. The results are useful for investment managers and prospective investors in their efforts to ensure governance mechanisms that enhance corporate value to the benefit of stakeholders