Browsing by Author "Nzimande, Ntokozo Patrick."

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Business cycles, fiscal policy and monetary integration in Southern African Development Community.
(2018) Nzimande, Ntokozo Patrick.; Ngalawa, Harold Phellix Emmanuel.
This thesis investigated the selected macro-monetary topics in the Southern African Development Community (SADC). The thesis is presented in three distinct but related essays. The rst essay (Chapter 2) examines the extent to which business cycles are synchronised in the SADC area using a dynamic factor model which separates idiosyncratic shocks from common shocks (regional common shocks). Countries are said to be synchonised if regional common shocks explain a large variance of withincountry business cycles. Conversely, if a large variance of within-country business cycles is accounted for by idiosyncratic shocks then countries are said not to be synchronised. The study results have in-depth rami cations for the proposed SADC monetary union. If business cycles are synchronised, it implies that provided that other conditions for establishing a monetary union are satis ed, the use of a single monetary policy may be optimal. Put di erently, if business cycles are driven by common shocks then the use of a mutual monetary policy is warranted. The results of the study show that the regional common factor is important for some countries, and not for others. More precisely, it was discovered that regional common shocks signi cantly explain most within-country business cycles in Botswana, South Africa, Malawi, Tanzania, Democratic Republic of Congo, Lesotho, and Swaziland, suggesting that a shared monetary policy could be considered among these countries. In addition, the study demonstrated that idiosyncratic shocks play little or no signi cant role in explaining within-country business cycles for most countries considered in the sample. Idiosyncratic factors are found to be signi cant only in Malawi, and Seychelles. The important nding emerging from the study results is that, based only on the business cycles synchronisation condition, a monetary union encompassing all SADC member countries would not be optimal. The second essay (Chapter 3) examines the endogeneity hypothesis in the context of the SADC area. In particular, a Generalised Method of Moments is used to similarity, and exogenous factors on the extent to which SADC member states are synchronised. Panel data covering the period 2000 to 2016 is used to conduct the analysis. The study results show that trade integration positively affects business cycles synchronisation, suggesting that promoting/or stimulating intra-SADC trade could possibly result to intensified business cycles co movement in the bloc. In addition, the study results show that macroeconomic policies' similarity (that is both monetary and fiscal policies) exerts sanguine and statistically significant effect on business cycles synchronisation. It was found that oil price changes have a decoupling effect on regional business cycles. This could be explained by the fact that, in the SADC region, some countries are net oil importers while other are net oil exporters. Thus, the effect of oil movements depends on whether a country is a net importer, or net exporter of oil. While a monetary union entails benefits to member states, it comes at the 'expense' of the independence to alter monetary policy tools in order to deal with country-specific business cycles. Hence, for union members, fiscal policy becomes the only policy recourse available to deal with idiosyncratic macroeconomic disturbances/ or to mitigate conflicts over a preferred monetary policy. Therefore, fiscal policy sustainability is crucial for the functioning of a monetary union. Unsustainable fiscal policies may neither be a mechanism, nor effective tool for dealing with country-specific disturbances, thus threatening the stability of a monetary union. Hence, the third essay (Chapter 4) of this thesis examines the sustainability of fiscal policies in the SADC region using Bohn's (1998) fiscal policy reaction function. In particular, we employ dynamic panel models (that is, panel mean group, mean group, and dynamic fixed effects) to evaluate the response of government revenues to changes in public expenditures. Using data covering the period 1990-2016, the findings of the study reveal that public revenues positively react to changes in government expenditures. Thus, fiscal policies, in the SADC area, are found to be sustainable. However, the reaction coefficients are less than a unity, implying that investigate the role of trade intensity, financial integration, macroeconomic policy fiscal policies are 'weakly' sustainable. Therefore, we argue that SADC governments may face difficulties in marketing their debt in the future.
Effect of macroeconomic variables on stock returns under changing market conditions: evidence from the JSE sectors.
(2020) Moodley, Fabian.; Nzimande, Ntokozo Patrick.; Muzindutsi, Paul-Francois.
The equity market is seen as one of the key determinants of the fraternity of finance, as it unites investors with ambitions to invest in marketable instruments to earn a return on their investments. The equity market not only unites investors with similar ambitions, but is an important economic stimulus because it contributes a significant portion to economic growth. Underlying financial theories illustrate an interaction between stock market returns and macroeconomic variables. However, recently a debate has arisen in relation to the type of effect that is evident between macroeconomic variables and stock market returns. This debate is centred on the efficient market hypothesis (EMH), which depicts a linear effect and the adaptive market hypothesis (AMH), which advocates for a nonlinear affect. Thus, there is no empirical agreement regarding the relationship between macroeconomic variables and stock market returns. In an attempt to contribute to the debate, the study examined the interaction between macroeconomic variables and the Johannesburg Stock Exchange (JSE) indices returns under changing market conditions. The study’s objective was to establish the effect between macroeconomic variables and stock market returns in a bullish and a bearish market condition and to compare the expected duration of each market condition among the selected JSE index returns. The study used the Markov regime-switching model of conditional mean with constant transition probabilities. Moreover, preliminary tests in the form of graphical visualisations, descriptive statistics, correlation tests, unit root tests and stationarity tests with and without structural breaks were considered. The variables that formed part of the JSE consisted of the real values associated with the JSE All-Share Index, Industrial Metals and Mining Index, Consumer Goods 3000 Index, Consumer Services 5000 Index, Telecommunications 6000 Index, Financials 8000 Index and the Technologies 9000 Index. The macroeconomic variables included the real values of inflation (CPI) rate, industrial production rate, short-term interest rate, long-term interest rate, money supply (M2) and real effective exchange rate (REER). The JSE index returns series and the macroeconomic variable series contained monthly data that ranged from January 1996 to December 2018. The findings of the regressed model illustrated the JSE All-Share Index returns are negatively affected by long-term interest growth rate in a bull market condition, by short-term interest growth rate in a bear market condition, and positively affected by industrial production growth rate in a bear market condition. The Industrial Metal and Mining Index returns are negatively affected by inflation growth rate in the bear market condition. The Consumable Goods Index returns are positively influenced by growth rate of real effective exchange rate in a bullish market condition, negatively affected by inflation growth rate, short-term interest growth rate and growth rate of REER in a bear market condition. The Consumable Service Index returns are negatively affected by short-term interest growth rate in a bull market condition and long-term interest growth rate in a bear market condition. The Telecommunication Index returns are negatively affected by long-term interest growth rate in the bull and bear market conditions and positively affected by growth rate of REER in a bear market condition. The Financial Index returns are negatively affected by long-term interest growth rate in a bull and bear market and short-term interest growth rate in a bear market condition. The Technologies Index returns are positively affected by growth rate of REER in a bull market condition. Moreover, the bull market condition prevailed the longest across the JSE selected indices. The findings of this study are consistent with AMH as it suggests that the efficiency and inefficiency of equity markets are owing to changing market conditions. Hence, macroeconomic variables affect the stock market returns differently under changing market conditions. Moreover, the findings were seen to contradict EMH as it suggests equity markets are efficient. As a result, the alternating efficiency effect under changing market conditions suggests that the effect of macroeconomic variables on stock market returns is explained by AMH and could be better modelled by nonlinear models. Thus, policymakers should consider that the effect of macroeconomic variables on JSE index returns varies with regimes and, therefore, develop appropriate policies.
Energy currencies : the case of Sub-Saharan Africa.
(2014) Nzimande, Ntokozo Patrick.; Kohler, Marcel Rene Anton Robert.
Abstract available from print copy.