Doctoral Degrees (Economics)

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    Wellbeing in South Africa: regional economic disparities, conspicuous consumption, and the provision of infrastructure.
    (2023) Mpungose, Sakhile Kieth.; Muller, Colette Lynn.; Dobreva, Ralitza Vassileva.
    This thesis investigates the correlates of subjective well-being in South Africa, with a focus on the role of location, and specifically the impact of regional differences, conspicuous consumption, and access to public infrastructure in South Africa (SA). This thesis contributes to the body of welfare economics in SA by addressing three sets of aspects of well-being. The first of these (Chapter 3) is about individual differences in subjective well-being (SWB) across regions. This chapter makes use of five waves of the National Income Dynamics Study (NIDS) and the Quantac EasyData, corresponding to the NIDS waves. Using a combination of pooled ordered probit (POP), pooled ordinary least squares (POLS), and fixed-effects (FE) estimation, the overall finding from the first study shows that individual SWB differs across regions. Individuals located in urban district municipalities and economically thriving provinces report higher levels of individual SWB relative to individuals located in economically deprived regions. The second aspect (Chapter 4) examines the effect of conspicuous consumption by others on individual well-being. Using all five waves of the NIDS data, the findings suggest that, after controlling for comparator expenditure at the cluster and district level, conspicuous consumption by others at the district level decreases individual SWB after controlling for other important correlates of SWB. Also, it is worth mentioning that the findings differ depending on the proximity of the reference group. The findings suggest that individual SWB is negatively sensitive to conspicuous consumption by others that occurs in distant proximities, as opposed to close proximities. The third part (Chapter 5) examines the effect of access to public infrastructure on individual SWB. Access to infrastructure is measured by the distance individuals travel to the nearest educational, healthcare, and police service facility. Using data from the Living Conditions Survey (LCS) 2014/2015, the overall findings show that the effect of access on individual SWB differs across the various kinds of infrastructure facilities. Furthermore, long distances travelled to access public infrastructure pose a significant barrier for vulnerable segments of the population. Therefore, the government’s policy framework and commitment should be invigorated towards improving structural and systemic factors that hamper effective access to infrastructure.
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    Energy consumption and economic growth: evidence from African oil exporting countries.
    (2022) Ogunsola, Akindele John.; Tipoy, Christian Kakese.
    This thesis examines the relationship between energy consumption and economic growth in a sample of African oil-exporting countries (AOECs). The group comprises Algeria, Angola, Egypt, Gabon, Nigeria and the Republic of Congo. The thesis presents three separate, but interconnected essays based on annual data on the period 1980 to 2018. The persistent energy consumption issues are ascribed to the failure of energy planners to understand the various macroeconomic factors that influence energy consumption. Therefore, the first essay in Chapter 3 investigates the factors influencing energy consumption, using the cross-sectional autoregressive distributed lag and the cross-sectional distributed lag modelling estimators. These estimators consider the time dynamics and the heterogeneity of the different countries. Moreover, they are robust to cross-sectional dependence. The study explores the relationship between energy consumption and its major determinants, such as openness, economic structure and per capita income. The results reveal that openness has a positive and significant effect on energy consumption in AOECs during the period under study, while the economic structure has a negative and significant effect. The third variable of interest, namely per capita income, does not impact significantly on energy consumption. It is, therefore, recommended that these countries transform their economies structurally such that it will make economic growth more inclusive, driven by domestic value-added and not exogenous income from primary product exports. Most African net oil exporters are characterised by a unique paradox. They have low energy consumption despite their large energy deposits, and their economic growth rates are lower than both the global and African average. Hence, the second essay in Chapter 4 investigates the causal relationship between energy consumption and economic growth. The study uses both linear and non-linear estimators. The study estimates a panel smooth transition vector error-correction model, which is robust to cross-sectional dependence and endogeneity and conduct a regime-wide Granger causality test. The study finds that the nonlinearities between the two variables are better explained whenever energy consumption is the transition variable. The Granger causality results show that in the short run, neither energy consumption nor economic growth causes each other in both low and high-growth regimes. In the long run, however, energy consumption Granger causes economic growth in high-growth regimes only. The economic growth variable, Granger causes energy consumption in both regimes. We conclude that a high economic growth rate drives energy consumption in AOECs. Consequently, it is recommended that conservation policies such as eliminating fossil fuels should be implemented efficiently, as they can hinder growth in the long run. A close connection exists amongst oil price shocks, energy consumption and economic growth. This connection has consequences for the growth of an economy. Using the Bayesian structural vector autoregressive model, the third essay in Chapter 5 analyses the impact of oil price shocks on energy consumption and economic growth. The study finds that the oil price shocks impact energy consumption and economic growth of all six AOECs. Conversely, the domestic variables of energy growth and economic growth does not impact oil price inflation. The unexpected variations in energy consumption impacts positive influence on economic growth in Nigeria, the Republic of the Congo and Gabon, whereas it is an inverse relationship in Angola, Egypt and Nigeria. The shock of economic growth leads to positive change in energy consumption in Angola, the Republic of the Congo, Egypt and Nigeria, but with inverse relationship in Algeria and Gabon. It is on this basis that we recommend the diversification of these economies to lessen the effect of external shocks in AOECs.
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    Monetary policy shocks and industrial production in BRICS countries.
    (2017) Kutu, Adebayo Augustine.; Ngalawa, Harold Phellix Emmanuel.
    This study investigates monetary policy shocks and industrial production in BRICS countries. The study is presented in four separate but related essays. The first (chapter three) employs a Panel Structural Vector Autoregressive model (𝑃−𝑆𝑉𝐴𝑅) to investigate how monetary policy shocks affect industrial output in BRICS countries using monthly data for the period 1994:1 to 2013:12. A nine variable 𝑃−𝑆𝑉𝐴𝑅 with short-run restrictions among the variables is constructed for the analysis. The study finds that variations in the exchange rate have the largest impact on industrial output in the BRICS countries. It is also observed that inflation rates significantly increase industrial output, peaking after about 11 months. This suggests that monetary authorities should be cautious when formulating policies aimed at reducing the inflation rate because of the spill over effect on industrial output. Further analysis reveals that interest rates have a marginal effect on exchange rates, while money supply makes a relatively large contribution to exchange rate fluctuations. Again, it is observed that changes in money supply exert a very large impact on variations in the rate of inflation. Thus, money supply plays an important role in curbing inflation. The study also analyses variations in interest rates, money supply and inflation and recommends that monetary authorities in the BRICS countries adjust interest rates, and not money supply, in response to inflation expectations. The second essay (chapter four) models exchange rate behaviour in the BRICS countries. This study examines global shocks and variations in the BRICS countries local currency/United States dollar exchange rate using the symmetric Generalized Autoregressive Conditional Heteroscedasticity (GARCH), Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH) and Asymmetric Power Autoregressive Conditional Heteroscedasticity (APARCH) models to determine the relationship between the two. The GARCH, EGARCH and APARCH are employed under normal (Normal Gaussian) and nonnormal (Student‘s t and Generalized Error) distributions. Using monthly exchange rate data covering the period – , the study finds that exchange rates in Brazil, Russia and India can well be modelled by the symmetric GARCH (1,1) model while in China, the three models perform well. In South Africa, the results of the three models also perform well but the EGARCH (1,1) model is found to be the best. Further analyses of the models reveal that the Student‘s t distribution produces better fit for estimating exchange rate variations and global shocks in BRICS countries compared to the Normal Gaussian and GED values under the nonnormal distributions. Overall, the study recommends that the BRICS countries should consider the impact of oil prices and global interest rates when formulating and implementing policies that impact on exchange rates. The third essay (chapter five) examines whether the five BRICS countries share similar business cycles and determines the probability of any of the countries moving from a contractionary regime to an expansionary regime. The study further examines the extent to which changes in monetary policy affect industrial output in expansions relative to contractions. Employing the Peersman and Smets (2001) Markov-Switching Model (MSM) and monthly data from 1994:01 – 2013:12, the study reveals that the five BRICS countries have similar business cycles. The results further demonstrate that the BRICS countries‘ business cycles are characterized by two distinct growth rate phases: a contractionary regime and an expansionary regime. It is observed that area-wide monetary policy has significantly large effects on industrial output in recessions as well as in booms. It is also established that there is a high probability of moving from state 1 (recession) to state 2 (expansion) and that on average, the probabilities of staying in state 2 (expansion) are high for each of the five countries. It is, therefore, recommended that the BRICS countries should sustain uniform policy consistency (monetary policy), especially as they formulate and implement economic policies to stimulate industrial output. The fourth essay (chapter six) investigates the long run and short run dynamics between industrial production and the factors affecting production in the emerging market economies of BRICS countries. Using the Chudik and Pesaran (2013) P-ARDL model and monthly data from 1994:01 – 2013:12, the study finds evidence of a cointegrating relationship between industrial production and selected variables. It is further observed that capital, labour, per capita income and exports have a positive long run impact on industrial production in the BRICS countries. However, a currency appreciation (an increase in the exchange rate) has a negative impact on industrial production. In the short run, it is found that imports, exports, exchange rates, labour, capital and per capita income significantly affect industrial production. The policy implication stemming from the analysis is that a sound economic policy is important for output production and industrialization in BRICS countries while poor policy will result in a nexus of constraints from which escape may be difficult (or impossible). The industrial sector, therefore, should also be listed as a sector that can actualize the diversification process and boost economic performance in the EMEs. There should also be policy consistence in curtailing the declining trend of industrial production.
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    Monetary policy shocks and economic growth in economic community of west African states.
    (2022) Famoroti, Olesugan Jonathan.; Omolade, Adeleke.
    An effective economic management is contingent upon the knowledge of how shocks emanate from monetary policy and other sources that affect the economy. This study examines the monetary policy shocks and economic growth in the Economic Community of West African States (ECOWAS), segregated into sub-regions of WAMZ and WAEMU. This is carried out under three related sub-objectives, using quarterly secondary data from 1980(1) to 2020(4). The first objective offers an empirical investigation into the determinants of the monetary policy rate in ECOWAS, considering both internal and external variables, using ARDL. The results revealed that in order to ensure long-run stability in the policy rate among the members’ states of ECOWAS, determinant variables including exchange rate, inflation rate and the gross domestic product should be given closer attention, so that the trajectory for potent structure can be designed and incorporated into the economic structure and policy frameworks accordingly. The second objective of this study employed a Panel Structural Vector for the modelling of monetary policy transmission shock in the region. The key results suggest that fluctuations of the monetary policy do not have significant effects on economic growth but significantly impact the general price level. Moreover, the study finds that the exchange rate is persistently a vital mechanism that significantly influences the variables of the real economy. Our estimates further suggest that there is idiosyncratic evidence found in the results, which is the anomaly of Price puzzle. Furthermore, this study used the Markov switching model for the third objective to investigate the impact of monetary policy shocks in two regimes of the business cycles in ECOWAS countries. The results show that the countries are having common business cycles. In addition, the study offered enough evidence that the monetary instruments are significantly more potent at contractionary than expansionary regimes. ECOWAS region appears to have a comparatively shorter business cycle than the developed countries. Hence, the design of policies by the monetary authorities in this region, aimed at shortening the duration of the contractionary period must be meticulously formulated to avert negative consequences of strict contractionary policy and ditto to expansionary policy.
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    Childhood and adult disability: impacts on education and the labour market in South Africa.
    (2022) McKenzie, Tamlyn Candyce.; Vermaak, Claire Lauren.; Hanass-Hancock, Jill.
    Equal opportunities in education and the labour market are prioritised on the global agenda for people with disabilities. It is widely acknowledged that people with higher levels of education are more likely to find employment and to earn more compared to people with lower levels of education. Any negative impact on educational attainment during school-going years may result in long term labour market consequences in adulthood. People who are unable to access education, may fall into poverty and poverty makes people more vulnerable to acquiring disabilities. In addition, people with disabilities are less likely to participate in the labour market and if they do are more likely to be unemployed thus perpetuating this disability and poverty cycle. As a means of monitoring the Convention on the Rights of Persons with Disabilities, an internationally recognised and comparable survey instrument designed by The Washington Group (WG) was incorporated into the General Household Survey (GHS) in South Africa from 2009. Very little academic research has been conducted in South Africa using the WG questions yet the White Paper on the Rights of Persons with Disabilities prioritises monitoring and evaluation through rigorous research. This thesis demonstrates the ways in which household survey questions on disability have evolved over time due to the conceptual changes from the medical model of disability to the social model and how these questions can be used to measure disability prevalence. Using the GHS and the WG set of questions, the thesis estimates how childhood disability is associated with school attendance and progression. The findings strongly suggest that children with disabilities, particularly those with more severe disabilities, are more likely to be out of school and when they are in school they are at least two years behind their peers without disabilities. For adults with disabilities the probability of labour market participation and employment is lower. In addition, there is a notable gap in earnings between people with and without disabilities. Severe disabilities (involving physical and cognitive impairments) have worse outcomes overall. Importantly, the results suggest that if people with disabilities are able to attain equivalent levels of education to their peers without disabilities, their labour market outcomes improve significantly. This study therefore demonstrates the vital importance of education and the need for education to be the primary focus of policy efforts for people with disabilities.
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    Analysis of sexual and reproductive healthcare utilisation among young people in Zimbabwe.
    (2020) Muchabaiwa, Lazarus.; Mbonigaba, Josué.
    Despite the development and implementation of an adolescent and youth sexual and reproductive health (ASRH) strategic plan in 2010, Zimbabwe has the third-highest HIV prevalence amongst sexually active teenagers in Southern Africa. The country can potentially suffer future socioeconomic decline due to adverse health outcomes resulting from the current risky sexual and reproductive health behaviour among its youth and adolescents. The attainment of the United Nations’ Sustainable Development Goals (SDGs) may be compromised owing to this predicament. The thesis analysed the utilisation of adolescent and youth sexual and reproductive health services and their outcomes in four essays. The first essay investigated the socioeconomic factors that influence ASRH service utilisation, the resultant outcomes and their distribution. The essay updated existing literature by providing recent evidence on ASRH specific socioeconomic determinants and their equity connotations, which has been lacking since the implementation of the ASRH strategy in 2010. The essay applied the logistic regression and concentration index techniques on the Zimbabwe Demographic Health survey (ZDHS) data. Findings revealed that inequalities favouring advantaged groups widened in STI treatment, HIV testing, STI treatment, as well as in condom and contraceptive use. Progress was made in early childbearing, which declined among the uneducated. Another positive development was the disproportionately higher HIV infection among females, which declined by almost half between 2005 and 2015. The second essay analysed the impact of the government’s ASRH strategy on the utilisation of ASRH services. The essay’s contribution was its quantitative insight into whether a multi-pronged approach or commitment of more resources results in better ASRH outcomes. The difference-in-differences impact evaluation technique was applied to ZDHS data collected in 2010 and 2015. Results indicated that service utilisation for HIV testing and treatment of sexually transmitted infections (STIs) increased. The ASRH strategy also reduced HIV prevalence. These impacts differed by education status and place of residence. Results also showed that provinces that received more resources did not attain better ASRH outcomes, suggesting that future focus should be on the quality of services. The third essay sought to characterise the risk preferences of youth. Its contribution lies in using prospect theory to fit youth risk-taking in the domain of sexual and reproductive health as a departure from the normally assumed expected utility theory. Primary data was collected from university students in Zimbabwe using a socioeconomic questionnaire and pairwise lottery choice tasks based on hypothetical ASRH interventions with uncertain outcomes. Prospect theory parameters were estimated using patterns of the respondents’ choices over the lottery tasks. This is the first study, to the researcher’s best knowledge, that estimates ASRH risk parameters within the prospect theory framework. Bivariate techniques, ordinary least squares and interval regression methods were used to examine socioeconomic differences in risk preferences. Results indicated that the ASRH behaviour of youth fits within prospect theory. Bivariate and multivariate regression analyses showed that income, prior sexual and reproductive health knowledge, and alcoholism were associated with risk and loss aversion. The fourth essay investigated the long-term consequences of ASRH practices from the female youths’ perspective as the hardest hit gender. The essay’s contribution lies in unearthing the magnitude of lifelong effects of failure to utilise ASRH interventions during adolescence, which is missing from Zimbabwean literature. The essay applied propensity score matching and multivariate regression techniques on ZDHS data collected in 2015. Findings revealed that non-utilisation of ASRH services leads to lower educational attainment, lesser chances of career development, poverty, as well as the contracting of STIs and HIV infections. Overall, these findings have several implications. Firstly, health policymaking must consider inclusive ASRH strategies that target currently excluded youths in rural areas, uneducated and poor households, and consider their unique risk preferences. In addition to that, future ASRH strategies should focus on service quality and increased coverage to improve outcomes and attain SDG targets. Secondly, the nature of youths’ risk preferences entails that ASRH awareness campaigns be positively framed to improve uptake of ASRH services. In addition to that, policymakers need to facilitate youth economic emancipation to increase economic prospects, which improves economic reference points that are critical facilitators of risk aversion. Lastly, future ASRH strategies need to have better coordination and monitoring since they involve different implementers. Furthermore, the ASRH strategy needs to be integrated into other sectors' goals that it impacts, such as education and labour.
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    Oil price shocks, exchange rates and output performance in Africa's oil exporting countries.
    (2021) Rotimi, Mathew Ekundayo.; Ngalawa, Harold Phellix Emmanuel.; Kutu, Augustine Adebayo.
    This thesis examines oil price shocks, exchange rates and output performance in a sample of Africa’s Oil-Exporting Countries (AOECs) (Algeria, Egypt, Gabon, Libya, and Nigeria). Using quarterly data from 1980 to 2018, it is presented in three separate, but interrelated essays. The first essay presented in chapter three constructs a seven-variable Panel Structural Vector Autoregressive (PSVAR) model with the imposition of short-run restrictions to examine the oil price shocks transmission mechanism. In the same framework, trends in output growth and oil prices are examined and it is established that oil price shocks have statistically significant impacts on output and exchange rates in AOECs. The essay concludes that exchange rates is the channel through which oil price shocks are transmitted to the economy. It is thus recommended that stabilizing exchange rates is vital for sound economic performance in AOECs. The second essay which is presented in chapter four forecasts the AOECs’ exchange rates. Using quarterly data covering 1980 to 2018, it employs Autoregressive Distributed Lag (ARDL). The regression is estimated using data from 1980-2015 and forecasting data from 2016-2018. The forecasting model, which uses various forecasting evaluation criteria, supports the suitability of the model to forecast exchange rates. Furthermore, the results show that forecast combination methods may have a good predicting power on exchange rates. Combined forecasting is therefore recommended as a way to achieve predictive forecasting accuracy in AOECs. Employing a Panel VAR model, the third essay investigates the asymmetric relationship between oil price and output. Using quarterly data from 1980 to 2018, oil prices are decomposed into positive and negative components to examine how output responds. The findings reveal an asymmetric relationship between oil prices and output. They show that, on average, positive oil price shocks positively impact output and this effect remains significant in the long run. The reverse is observed in negative oil price shocks. In terms of magnitude, the study finds that negative oil price shocks impact output at more than double the rate of positive oil price shocks. The results also reveal that low output in AOECs is associated with uncertain variations in oil prices and that an increase in oil prices results in increased inflation, which could result in higher levels of unemployment. This finding is associated with the inadequacy of refining capacity in the AOECs, causing them to import refined fuel at a high cost. It is thus established that the economies of the AOECs are vulnerable to negative oil price shocks that negatively affect exchange rates, while positive oil price shocks positively affect the cost of production. It is on this basis that the study recommends that AOECs should build sufficient external reserves to minimize the impact of negative oil price shocks on exchange rates.
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    Do competition regimes matter in international trade? a case study of the Tripartite Free Trade Area.
    (2021) Dube, Cornelius.; Sibanda, Mabutho.; Holden, Merle Gwendoline.
    This thesis assesses the importance of competition policy and competition reforms in enhancing regional and continental integration processes. While using the envisaged Tripartite Free Trade Area (TFTA) as a case study, it assess competition reforms in the individual countries as well as bilateral trade flows between the countries that would become members of the TFTA. As strides are now being made towards continental integration, the role that competition policy adoption and enforcement can play in enhancing benefits from the integration remains largely unexplored. The thesis’s objectives were threefold. Firstly, it aimed to demonstrate the need for competition reform to be part of the discussions on regional integration at the level of the envisaged TFTA by showcasing how existing bilateral trade flows between the countries were influenced by competition reforms in the countries. Secondly, the study investigated whether the existing competition regimes in the countries that would form the TFTA reflect a general belief in competition policy. Thirdly, it aimed to assess whether changes in levels of economic development over time within the African context, as reflected by members of the envisaged TFTA, influenced decisions to tighten competition regimes. An index, the Competition Reform Index (CRI), which quantitatively measures the strength of competition regimes, was designed to assess the level of acceptance of the competition reform agenda among the countries constituting the TFTA. Such acceptance is inferred based on univariate methods, specifically how the levels of the mean CRI, the standard deviation of the CRI and the maximum CRI score, have evolved over time. CRI data for 23 countries over the period 1998 to 2018 is used for this purpose. The manner in which competition reforms impact international trade was estimated using panel data models, with a measure of the strength of competition regimes included among the explanatory variables. More specifically, the gravity models of international trade were estimated through random effects panel data models and Generalised Methods of Moment (GMM) models, using bilateral country exports and imports for countries that would be part of the envisaged TFTA. The estimation for the random effects and GMM models was over the period 2001 to 2016 across 20 countries1 that would all be part of the proposed TFTA. The extent to which adoption of competition reforms in the envisaged TFTA could have been the result of changes in economic performance in these countries was estimated using panel Granger causality methods, for 23 countries over the period 1998 to 20182. More specifically, the study estimated the extent to which changes in Gross Domestic Product (GDP) levels in the proposed TFTA countries Granger cause changes in the CRI. The mean score of the CRI shows that although only 20% of the countries in the TFTA have not yet embraced competition reforms, few countries have been subjected to high quality competition regimes for a long period of time. The standard deviation of the CRI reflects some attempts to improve competition reforms over time in the region, although only 44% of the countries in the TFTA have high quality competition regimes. This confirms earlier studies that showed that some competition laws were adopted among the countries in the envisaged TFTA, but were designed to ensure that other public interests are not compromised. The study established that tightening competition reforms in the exporting country, reflected in an increase of 1% in the competition reforms variable will, on average, result in bilateral exports increasing by between 0.1% and 0.16%, holding other influencing variables constant. However, if the importing countries increase their competition variable by 1%, an average short-run decrease of 0.46% in bilateral exports would be expected, holding other things constant. With respect to imports, the results show that bilateral imports among countries in the proposed TFTA will increase by between 0.07% and 0.18% if the exporting countries increase their competition reforms by 1%, holding other influencing variables constant. The findings from the Granger causality tests of panel data do not produce statistically significant evidence that there is short-run causality from GDP to CRI. However, in the long run, this relationship is statistically significant. There are three major implications of these findings. Firstly, there is still room for countries to improve their competition regimes and enjoy more benefits from regional integration within the envisaged TFTA. Second, competition reforms should be enhanced in a quest to promote regional competitiveness and ultimately, global penetration rather than bilateral trade within the TFTA. This is due to the fact that an increase in bilateral exports in the TFTA is only apparent if other countries are lagging behind in competition reforms. Thus, if all countries in the TFTA were to adopt competition reforms, this added advantage would be neutralised. Third, the absence of short-run causality between GDP and competition reforms implies that regulatory capture and vested interests, which are characteristic of countries with low levels of development, are no longer a significant obstacle in the TFTA. This is encouraging from a policy perspective, as efforts to promote competition reforms at regional level can be continued across all countries with little fear of country vulnerability to capture by business and other vested interests.
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    Financial stability and monetary policy in South Africa.
    (2020) Dlamini, Lenhle Precious.; Ngalawa, Harold Phellix Emmanuel.
    This thesis is presented in three distinct but related essays. The first essay (Chapter four) explores how financial stress interacts with monetary policy. Financial stress was measured using a time-varying financial conditions index constructed by Kabundi and Mbelu (2017) for South Africa employing thirty-nine monthly financial market variables and macroeconomic variables. The study employed a Markov Switching Vector Autoregression (MSVAR) model estimated with Bayesian methods to investigate this dynamic relationship. The findings reveal that interest rates respond negatively to a high financial stress shock, leading to an increase in credit growth. Despite the expansion of credit, real GDP growth increases marginally and then gradually declines. Given the complementary objectives of financial stability and monetary policy, it is concluded that monetary policymakers need to consider financial stability. Furthermore, the impact of monetary policy is not restricted to adjustments in interest rates; it affects other factors such as lending risk functions. The second essay (Chapter five) examines the interaction of housing-related macro-prudential policies and monetary policy. The study uses housing cycles in a Dynamic Stochastic General Equilibrium (DSGE) model with a small, open economy framework. We estimate the model with Bayesian techniques using South African data covering the period 2000Q1 to 2018Q4. The results indicate that monetary policy has negligible effects on house prices. We consider a loan-to-value (LTV) tool for macro-prudential policy. The results show that a one per cent rise in the LTV ratio, a tight macro-prudential policy, leads to increasing house prices, with significant effects on Consumer Price Index (CPI) inflation. The effects on CPI inflation suggest that monetary policy is not very effective. Efficient policy frontier analysis indicates that the introduction of macro-prudential policy yields an improved, effective outcome that lowers output and inflation volatility. The findings suggest that there is a need for coordination of monetary policy and macro-prudential policy. The third essay (Chapter six) investigates monetary policy and the role of countercyclical bank capital regulation in fostering macroeconomic and financial stability. We employ a DSGE model with a borrowing cost channel and endogenous financial frictions driven by bank losses, bank capital costs and credit risk. The study finds that a policy regime that combines an optimal Taylor rule and macro-prudential policies shows a clear trade-off between price and macroeconomic stability. The results emphasise the significance of the Basel III Accord in mitigating the output-inflation variability faced by the policy authorities, and questions the simultaneous deployment of an optimal Taylor rule.
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    Impacts of military expenditure and institutional quality on inclusive growth in BRICS countries.
    (2019) Anifowose, Oladotun Larry.; Omolade, Adeleke.; Mukorera, Sophia Zivano Elixir.; Nyatanga, Phocenah.
    This study investigated the relationship between military expenditure, institutional quality and inclusive growth in BRICS countries from 1970 to 2017. The increase in military expenditure by BRICS and the worsening inclusive growth indices such as unemployment, inequality, poverty, among others, necessitated the assessment of the relationship between military expenditure, institutional quality and inclusive growth in the BRICS countries. The study was carried out under three modular themes, which also form the objectives of the study, namely; the determinants of military expenditure, computation of inclusive growth index for the BRICS and the effects of military expenditure and institutional quality on the inclusive growth index of the BRICS countries. Panel data analysis was applied for the first objective, the Z-score technique was used for the second objective, which involved the computation of inclusive growth index for BRICS. The third objective was analysed using the Auto-Regressive Distributed Lags ARDL for BRICS countries by using times series data. The results obtained on the first objective revealed that BRICS military expenditure was significantly and majorly determined by Gross Domestic Product (GDP), trade balance, security web and inflation rate for the period under analysis. The results on Objective 2 revealed that the average inclusive growth index for Russia was the highest among the five BRICS countries, followed by China and Brazil. However, South Africa and India fell below the average inclusive growth index computed for BRICS. The results on Objective 3 showed that the impacts of military expenditure and institutional quality on inclusive growth varied among the BRICS countries. From the literature, the most effective way of assessment is to focus on the impact of the interactive form of military expenditure and institutional quality. Findings revealed that the interactive form of military expenditure and institutional quality (MCP) only have significant impact on inclusive growth of Russia because the coefficient is positive and significant. The coefficient is negative and significant for China and South Africa while the same coefficient is not significant at all in Brazil and India. This implies that Russia is the only country in the BRICS where the interaction of military expenditure and institutional quality supports inclusive growth. Notwithstanding, other control variables such as education and population have statistically significant effects on inclusive growth in Brazil, China and South Africa. Results on India emerged as a complete outlier among the five as none of the variables, including the control variables was found to have a statistically significant relationship with inclusive growth. Again, the efforts in this study included a comparison of the inclusive growth results with those of economic growth and per capita income which have been used by previous studies to investigate the effect of military expenditure on the BRICS economy. The results showed that findings under the Inclusive Growth Model were the same for that of economic growth and per capita income for Russia, China and South Africa. However, there are some differences firstly; the negative effect of the interaction of military expenditure and institutional quality in Brazil which is significant on inclusive growth is not significant on economic growth and per capita income. This shows that the adverse effect of this variable was more felt on inclusive growth than economic growth in Brazil. Again, military expenditure and institutional quality showed a positive significant impact on India’s economic growth and per capita income, but the effect on inclusive growth was not significant. Finally, levels of investment in all the countries have shown significant positive impacts on economic growth and per capita income, but the current levels of investments in the BRICS fail to drive inclusive growth significantly except in Russia. These results further confirmed that assessment of the impacts of military expenditure and institutional quality using economic growth and not inclusive growth might be misleading. Based on the findings from this study, the following recommendations are made: First, there is the need for improvement of synergy between military expenditures and institutional quality before the challenge of inclusive growth in the BRICS can be tackled effectively. Second, prioritising inclusive growth more than economic growth is more germane to the assessment of the effectiveness of military expenditure.
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    Socio-economic, environmental and institutional sustainability and economic growth within BRICS: what are the best policy options?
    (2020) Awolusi, Olawumi Dele.; Mbonigaba, Josué.
    Due to diverse socio-economic, environmental, institutional characteristics and different levels of industrial development, a major problem in BRICS (Brazil, Russia, India, China, and South Africa) countries is how bloc member countries can work together to advance the goals of economic growth without compromising individual member countries aspirations to sustainability. For BRICS cooperation to bring about improved welfare in individual countries, economic growth in the bloc needs to be conducive to sustainability in individual countries. Otherwise, policies need to be enacted to ensure sustainability in the bloc. The formulation of policy options would require extensive knowledge of how economic growth relates to identified sustainability variables. Consequently, the overall objective of this thesis is: To examine the effect of economic growth on socio-economic, institutional, and environmental sustainability within the BRICS as well as compare evidence on relationships between economic growth and sustainable developments within the BRICS bloc. To accomplish the stated objective, the thesis used various non-linear and linear estimators that are robust to both small sample size bias and cross-sectional dependence errors, contrary to most literature on the topic. The overall argument of the thesis was supported by four different pieces of analysis, each contained in a publishable paper. The first article (chapter 3) titled "Socio-economic sustainability and economic growth in BRICS: relationships and policy options" investigates the influence of economic growth on socio-economic sustainability in BRICS to observe possible patterns in this bloc. The paper uses Pesaran et al. (2001) autoregressive distributed lag (ARDL) co-integration technique, as well as, Toda and Yamamoto (1995) granger non-causality approach in a two-variable vector autoregression model. In this paper, the results established the existence of co-integrating vectors and short-run causal relationships, which run either unidirectionally or bidirectionally in all the variables. Our study, therefore, concluded that the long-run equilibrium relationships between economic growth and socioeconomic sustainability in BRICS vary from one country to another, but were largely insignificant in the models of Russia and China during the study period. This conclusion is tacit support for the Kuznets hypothesis in both China and Russia. The study concluded that a common policy option was not possible and that for the block to pursue its economic prosperity goals without compromising individual countries' needs for socio-economic sustainability, varied radical policy options were inevitable in Brazil, India, and South Africa. These include radical law reforms and independent organisations; population growth control, speedy poverty alleviation and basic education; market development; and creation of societal culture to promote socio-economic sustainability. Article 2, titled "Economic growth and institutional sustainability nexus within BRICS: Relationships and policy options" in Chapter 4 of the thesis examines the influence of economic growth on institutional sustainability within BRICS. The paper adopted a panel data cointegration analysis and Hausman specification test. As a robustness check, the study launched the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) estimations at individual and panel levels over the study period. The study concluded that the effect of economic growth on institutional fitness within BRICS, though significant and positive, was limited and varied. Specifically, the study observed that China performed well among the five countries. Consequently, this study posited a more radical policy mix to enhance institutional sustainability in the three (Brazil, India, and South Africa) less developed countries in the bloc. The policies could focus more on developing radical institutional strategies; superior growth induced domestic investment, financial developments, and circular economic model. vi Article 3 in Chapter 5 of the thesis, titled “Economic growth and environmental sustainability within BRICS countries: A comparative analysis " focused on the influence of economic growth on environmental sustainability within BRICS. Due to the probable crosssectional dependency errors, the estimates via the autoregressive distributed lag (ARDL) were supported by cross-sectional autoregressive distributed lag (CS-ARDL). The results confirm that economic growth and environmental sustainability are co-integrated at the panel level. Specifically, the study concluded that GDP growth exhibits a significant negative impact on C02 emissions in the short-run but reversed in the long-run, tacit support for the Environmental Kuznets Curve (EKC) hypothesis as supported by both the neoclassical and the new growth theories. The study, therefore, recommended policies to improve green economic growth, the nature of technology usage, energy consumption, and institutional fitness to achieve healthy environmental sustainability in BRICS. Article 4, Chapter 6, titled Economic growth and sustainable developments within the BRICS, MINT and G-7 countries: A comparative panel data analysis focused on the effect of economic growth on sustainable developments within the BRICS, MINT and G-7 countries, in an attempt to compare evidence, since differing levels of industrial development might mean different concerns about sustainability issues. The estimates via the autoregressive distributed lag (ARDL) were supported by cross-sectional autoregressive distributed lag (CS-ARDL) and crosssectional distributed lag (CS-DL). The results confirm that economic growth increases the level of sustainable developments in all BRICS countries in the short-run, but constitutes a drag on sustainable development in the BRICS sub-sample 1 (Brazil, India and South Africa) countries in the long-run. Consequently, this study recommended a more radical policy mix to reduce the negative impact of economic growth on the level of sustainable development in Brazil, India, and South Africa. These policies should take the form of focused, sustainable development strategies and energy policies, the creation of a new economy, and improved education. Overall, the validation of the Kuznets hypothesis in the relationship between economic growth and socio-economic sustainability in the BRICS bloc, as attested by the empirical validation of a probable EKC argument, depicted the necessity for a more radical sustainability policy mix by in three vulnerable countries (Brazil, India and South Africa). When compared with the two more advanced countries (China and Russia) for the more desired goal of sustainable economic growth to be realized, the outcomes were different. To the best of our knowledge, this is the first comprehensive study to analyses the effect of economic growth on sustainability to devise possible policy options that would take care of priority needs of individual countries (or subgroup of countries) in aspects of socio-economic, environmental and institutional sustainability in the BRICS bloc. Again, contrary to the practice in the literature, the study corrected for cross-sectional dependence. The study also addressed endogeneity issues in both linear and non-linear frameworks. Our results conform to all robustness checks, including temporal and spatial changes. The novelty of this thesis also rests on the provision of novel crossvalidation of estimation techniques, as well as the construction of socio-economic, institutional fitness, financial development, and sustainable development indices that are robust to small sample bias and cross-sectional dependence issues.
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    Analysis of the impact of foreign aid on economic growth in COMESA.
    (2020) Gondwe, Grace.; Mbonigaba, Josué.
    The Common Market for East and Southern Africa (COMESA) was officially established in 1994. Its primary objective was to help its member states attain sustainable economic growth and development through regional integration and trade. In this regard, the region’s specific goals encompassed: (a) comparable and balanced development of human capital, production and market structures in its respective member countries. (b) harmonization of the individual economic and trade policies among its member countries in line with its collective regional growth and development goals. Among the tools for the realisation of these goals, is a coherent and consistent development financing plan for the essential investments across its sectors. Accordingly, focusing on the region’s core objective of economic growth, this study empirically investigated how foreign aid, as one of the region’s vital development financing resource has influenced economic growth in the respective COMESA countries. Contrary to the existing literature, this thesis adopted a comprehensive approach that encompassed aggregate and sectoral implications of aid receipts in the region without undermining the role of the factors affecting its utilization as mostly discussed in the literature. From the political economy perspective, recent debates on Africa’s inclusive and sustainable growth have focused on structural transformation as a critical priority in transforming its development platform. Based on these debates, the thesis focused on two crucial sectors for comprehensive econometric assessments of direct and indirect effects of sectoral aid on growth. For direct effects of aid on growth, the work chose the agricultural sector, which continues to sustainably support the region’s structural transformation process through the provision of at least 50% of the raw materials to the industrial sector. The agricultural sector also supports livelihoods of at least 60% of the region’s population. For indirect effects, the thesis selected economic infrastructure as a critical enabler of effective backward and forward linkages between the agricultural sector and the industrial/ service sectors. This comprehensive assessment was therefore accomplished firstly by assessing the extent to which the received aid volumes in the respective COMESA countries consistently closed their overall and specific sectoral development financing gaps. Trends analysis of aid and economic growth performance showed that foreign aid is the dominant source of foreign capital, accounting for an average of 60 percent of the development financing gaps annually in COMESA countries. Although better growth performances were expected among aid recipients, erratic growth rates below the 7% minimum stipulated in the Sustainable Development Goals are widespread across the countries. Aid volatility and misalignment of iv the aid allocations across (within) sectors and among countries compromise the potency of aid in the region. Incidences of foreign aid receipts over and above the estimated external development financing gaps are partially due to the large share of humanitarian assistance in some countries. However, they also imply a lack of systematic assessment of the region’s development financing needs, particularly in countries whose public investments were fully covered by domestic resources yet these countries received foreign aid. Furthermore, sectoral prioritization in favour of non-growth enhancing consumption, mostly in the social sectors, may be redundant as far as growth is concerned. In this regard, the thesis recommends a joint donor-recipient country financing needs and COMESA-wide capacities assessments for effective targeting to improve growth outcomes of aid. This approach to development financing will be more effective if accompanied by policies that focus on strengthening domestic institutions and increasing domestic resource mobilization. Secondly, contending for comparable impacts of aid across the countries in the region for the attainment of unified regional growth and development goals, Chapter 5 assessed how the received aid affected growth in the respective countries using the Pooled Mean Group (PMG) estimator. The thesis found that although aid had a significant positive impact on growth in the short run, its long-term effect was negative. The results show that the long-term impact of grants on growth is positive and significant, while the net effect of loans on growth was negative and significant. In line with the visible adverse effects of corruption on aid utilization in the short run in most countries, the results show that corruption has a net negative impact on the utilization of loans and grant. Accordingly, the short-run effects of loans and grants varied significantly among the countries in the region, potentially reflecting which component of aid is mostly affected by their respective weak institutions. Overall, the results show thart the potency of total foreign aid is equally compromised by corruption in the long term . Furthermore, Chapter 5 found that domestic savings have a positive effect on growth both in the short and long run. Therefore, the chapter postulates better outcomes from aid if COMESA effectively addresses corruption in all its member countries. This should be complemented with policies and strategies that focus on effectively increasing domestic revenue (savings) to further enhance their growth outcomes complemented with foreign aid. Lastly, rationalisation of the region’s exports to enhance their competitiveness remains imperative if the exports are to productively contribute to its regional growth goals. v Thirdly, Chapter 6 analysed the impact of agricultural foreign aid on agricultural productivity and growth in a Panel Vector Autoregressive (PVAR) framework. The chapter finds a significant unidirectional causality from agricultural growth to foreign aid and thus confirming the theoretical dispositions of the developmental role of foreign aid. However, instead of complementing domestic resources in this regard, the results showed that foreign aid in the sector substitutes government financing, which effectively reduces its effectiveness. A mismatch in government resources and aid allocations to a sub-sector erodes the synergy that should typically exist between donor aid and government expenditure in a sector. This mismatch implies that a policy shift towards Result-Based (Aid on Delivery) approaches in aid disbursements will be critical to eliminating fungible resources. Misalignment of aid allocations with the respective sub-sectoral relative importance in the sectoral development goals was further found to undermine the potency of aid in the sector. Accordingly, the thesis contends for a better understanding of the role various sub-sectors play to the overall growth of the agriculture sector. This understanding will be crucial for equitable resource allocation and enhanced aid effectiveness. Moreover, the higher impact of domestic resources compared to foreign aid calls for policies to increase domestic resource mobilization and a broader focus on reducing aid. Lastly, the thesis assessed the contribution of foreign aid to the region’s infrastructure development in Chapter 7. Using the Blundell-Bond (BB) system Generalised Methods of Moments, the paper found that foreign aid has a net negative effect on infrastructure development mainly because of corruption which increases the cost of its loans. Although the results shows that corruption does not affect net utilization of grants, the regional effect of grants on infrastructure development negative. Notably, grants have been steadily declining since 2009 (Figure 3). Overall, the chapter shows the potential that loans have in turning around the infrastructure deficit in the region, particularly if corruption is effectively addressed in all the COMESA countries. Thus, the chapter concludes that unless COMESA countries effectively addresses corruption, it cannot adequately close its infrastructure gaps and cannot enhance its growth with foreign aid. With the highlighted positive and significant impact of domestic resources on infrastructure development in its core model, the chapter further recommends the exploring of other avenues of revenue for closing the infrastructure gaps. This examination will be beneficial in fast-tracking infrastructure development and enhance economic growth in the region. vi Overall, notwithstanding the comparable short-run positive effects of aid on growth across the countries in the region, the research failed to conclude that foreign aid positively contributes to the region’s long- term sustainable growth and development objective. While it marginally enhances productivity and growth of its core growth sector, foreign aid in the region has failed to bring about the desired changes in the growth-enhancing support sectors (economic infrastructure and social sectors). High levels of corruption in some of its member countries, which potentially lead to unnecessary increases in the overall financial costs of its loans, undermines the potency of foreign aid. Similarly, the substitution effect of aid on domestic resources further compromise the performance of foreign aid in the region. In this regard, “aid on delivery” (result based) approaches remain the best policy option to effectively eliminate fungible resources in all countries in the region. Furthermore, poor alignment of aid to the respective development financing gaps both across (within) sectors and countries is vital in accounting for aid inefficiency in enhancing the region’s growth. On the one hand, there is evidence of the lack of systematic assessment on the part of the region’s development partners (donors) to properly align aid to the region’s development financing gaps as reflected by episodes of aid over and above existing development financing gaps. While the large component of humanitarian aid in some of the countries in the region comprehensively explains this mismatch, it does not provide enough explanation about other countries in the region, including those whose investments were fully covered by domestic resources in the presence of aid receipts. On the other hand, poor sectoral prioritization of the received aid across the countries in favour of non-growth enhancing consumption, mostly in the social sectors, is redundant for the attainment of its growthenhancing objectives. In this regard, a thorough understanding of the region’s development financing needs and capacities to ensure the right targeting and effective utilization of both foreign aid and domestic resources remains imperative. Enhancing domestic resource mobilization will further be beneficial in reducing aid dependency in the region.
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    Drivers of mergers and acquisitions and firm value growth in emerging markets.
    (2019) Okofo-Dartey, Emmanuel.; Kwenda, Farai.
    This study investigates drivers of mergers and acquisitions (M&As) and firm value growth in emerging markets. It was targeted at acquirer firms from emerging markets since there is a continuous surge in acquisition transactions both locally and internationally by firms from the emerging markets. These acquirer firms have been using domestic and cross-border M&As as growth strategies to establish their presence and dominance in local and foreign markets. The study was executed with three distinct objectives. First, whether working capital positions of emerging market acquirer firms drive their M&A transactions and influence their decisions regarding the type of mergers they pursue using probit regression analysis. The free cash flow hypothesis was also tested to determine whether free cash flow available to these acquirer firms motivate them to undertake M&A deals. Second, whether managerial share ownership in firms drive M&A transactions by acquirers from the emerging markets and influences the sizes of target firms they acquire during acquisitions, again using a probit regression technique. The study under this objective further investigated the relationship between managerial discretion and the acquirers’ profitability levels. As a third objective, the study explored whether M&As transactions undertaken by emerging market acquirers are value-adding or value-destroying to shareholders of these firms by applying the Generalised Method of Moments (GMM) methodology. The study covered a period of 10 years from 2004 to 2013 for 160 acquirer firms from ten (10) selected emerging market countries. Data were gleaned from the Bloomberg Terminal and DataStream. Results of this study suggest that, working capital positions of acquirer firms from the emerging markets are less likely to motivate them to undertake acquisition deals. However, the study reveals the marginal effect coefficient for the firms’ total assets to be positive and statistically significant at 1%, suggesting that, their total assets rather are more likely to influence them to execute acquisition transactions, all other things being equal. There is no evidence of the firms’ level of financial leverage, returns on assets (ROAs) and Tobin’s Q having the potential to influence these acquirers to pursue M&As. The study further concludes that, the firms’ free cash flows (FCFs) motivate them to execute M&As compared to their working capital positions. Regarding whether the acquirer firms’ working capital positions influence the type of M&As they pursue, the results indicate that, it is less likely to encourage them to undertake either a horizontal or vertical type of merger. Further, our results revealed that, managerial share ownership of emerging market acquirers is also less likely to drive them into acquisition transactions and influence them to pursue smaller-sized targets during M&As deals. Results from the study further suggest that, managerial discretion has a negative relationship on profitability levels of acquirer firms from the emerging market as far as their acquisition pursuits are concerned. Finally, results of the study show that, emerging market acquirers do not experience value growth in terms of profitability and growth opportunities in the first three years after M&As deals. A number of policy prescriptions arising from this thesis are presented to guide managers, practitioners and shareholders of firms in the emerging markets to shape their thoughts on M&As executions. Highlights of these policy prescriptions this study proffers include the following; managers should not ignore the efficient management of working capital. They should institute proper working capital management practices in their companies, in order not to experience liquidity challenges of either excess or shortages as any of them could impact adversely on the efficient running of their business activities particularly in the short-term period. An acquisition or a merger should be seen as a two-edged sword. When finally, firms take a decision to pursue M&As as an investment strategy option, they must fully take into account the issue of resources availability too. The target firm should be evaluated before an acquisition or a merger is performed. After an acquisition or merger, firms should restructure and integrate their resources. Also, for managers to have absolute control over firms and be able to influence investments decisions such as M&As especially in the emerging markets, their ownership percentage should be above the suggested significant level of 20%. Policy makers should also take a second look at their firms’ financial leverage positions and growth in total assets if they desire to improve on their profits levels because results of this study indicate that they have a significant impact on the firm’s ability to engage in M&As. Further, when firms from the emerging markets are planning or considering M&As for immediate value growth, they should recognise that M&A may not provide immediate growth in the first three years after M&A. Rather, the effects of M&A on firms’ value growth may be expected in the long-term period of five years and beyond. However, apart from using M&As for growth purposes, they may be used to create other types of value, such as market power enhancement, risk minimisation through market or product diversification or cost efficiency. Furthermore, since uncertainties exist in M&As, advance preparation is needed before an acquisition or a merger is executed, including a development of planning strategies and improvement of firm governance structure. It is, therefore, important for institutions and government to cooperate to come up with stronger systems to monitor corporate governance practices to bring some sanity to the business community. Lastly, diversifying internationally appears to be an important strategy for reducing risk after a successful merger. It is more likely for investors, all other things being equal, to reduce the levels of risks associated with their investment portfolio if they invest in internationally diversified merged firm.
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    Adaptive market hypothesis and calendar anomalies in selected African stock markets.
    (2019) Obalade, Adefemi Alamu.; Muzindutsi, Paul-Francois.
    It takes a theory to beat a theory. However, whether the adaptive market hypothesis (AMH) offers better explanations for stock return behaviour than the popular efficient market hypothesis (EMH) still remains a question for serious empirical investigation. This question informed the analyses of efficiency and calendar anomalies in the selected African stock market, namely the Nigerian Stock Exchange (NGSE), the Johannesburg Stock Exchange (JSE), the Stock Exchange of Mauritians (SEM), the Casablancan Stock Exchange (MOSE) and the Tunisian Stock Exchange (TSE) with the sample period spanning from January 1998 to February 2018. The first objective of this study is to investigate whether market efficiency changes in cyclical version over time, according to the AMH. The second objective is to evaluate the effect of market conditions (up, down, bull, bear, normal) on return predictability. The third objective is to analyse whether calendar anomalies disappear and reappear over time. The fourth objective is to determine how the anomalies behave under different bull and bear market conditions. Various linear testing tools such as the variance ratio test, the autocorrelation test, the unit root tests and the nonlinear of BDS were implemented in rolling window approach to track time-variation in efficiency. A dummy regression model was used to evaluate the market condition effect on return predictability. This study also explored rolling window analyses of several alternative variants of nonlinear models of the GARCH family, to track variation in the behaviour of days-of-the-week (DOW), months-of-the-year (MOY) and intra-month effects. Lastly, the study modelled the switching behaviour of the calendar anomalies under bull and bear conditions by using the Markov switching model (MSM), which is able to generate regime-specific regression results for the calendar anomalies under consideration. Findings from the various linear and nonlinear tests revealed that there are cycles of significant linear and nonlinear dependence and independence in each of the five markets, suggesting bouts of predictability and unpredictability. The regression analyses of return predictability against series of market condition dummies revealed that highIt takes a theory to beat a theory. However, whether the adaptive market hypothesis (AMH) offers better explanations for stock return behaviour than the popular efficient market hypothesis (EMH) still remains a question for serious empirical investigation. This question informed the analyses of efficiency and calendar anomalies in the selected African stock market, namely the Nigerian Stock Exchange (NGSE), the Johannesburg Stock Exchange (JSE), the Stock Exchange of Mauritians (SEM), the Casablancan Stock Exchange (MOSE) and the Tunisian Stock Exchange (TSE) with the sample period spanning from January 1998 to February 2018. The first objective of this study is to investigate whether market efficiency changes in cyclical version over time, according to the AMH. The second objective is to evaluate the effect of market conditions (up, down, bull, bear, normal) on return predictability. The third objective is to analyse whether calendar anomalies disappear and reappear over time. The fourth objective is to determine how the anomalies behave under different bull and bear market conditions. Various linear testing tools such as the variance ratio test, the autocorrelation test, the unit root tests and the nonlinear of BDS were implemented in rolling window approach to track time-variation in efficiency. A dummy regression model was used to evaluate the market condition effect on return predictability. This study also explored rolling window analyses of several alternative variants of nonlinear models of the GARCH family, to track variation in the behaviour of days-of-the-week (DOW), months-of-the-year (MOY) and intra-month effects. Lastly, the study modelled the switching behaviour of the calendar anomalies under bull and bear conditions by using the Markov switching model (MSM), which is able to generate regime-specific regression results for the calendar anomalies under consideration. Findings from the various linear and nonlinear tests revealed that there are cycles of significant linear and nonlinear dependence and independence in each of the five markets, suggesting bouts of predictability and unpredictability. The regression analyses of return predictability against series of market condition dummies revealed that high predictability is associated with the bull, volatility and financial crisis periods, especially in NGSE, SEM and TSE and not in others. It suggests that the effect of market condition cannot be generalised for all markets. Further, rolling GARCH estimations showed that calendar anomalies disappear and reappear over time in line with the AMH. The evaluation of calendar anomaly under AMH provides a clearer picture of the behaviour of African stock markets as adaptive. Finally, the empirical results revealed that regime-switching is an important feature of calendar anomalies and that a calendar anomaly that is found in a bull regime tends to disappear or weaken in a bear regime and vice versa, depending on the market and the calendar anomaly in question. This study adds to the extant literature on the AMH in Africa and global markets. First, it shows that African stock markets are adaptive. Thus, it is more appropriate to describe African markets as adaptive markets rather than inefficient markets. Secondly, it provides empirical evidence of efficiency cum market condition in African stock markets. Thirdly, the study represents a timely contribution on calendar anomalies under AMH in African stock market. Fourthly, by evaluating DOW, MOY and HOM effects under AMH, this study extends the existing works on Monday and January effects in developed markets. Additionally, this study shows the usefulness of MSM in evaluating calendar anomalies under AMH.
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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.
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    An econometric analysis of the equity returns-inflation relationship in South Africa.
    (2019) Moores-Pitt, Peter Brian Denton.; McCullough, Kerry-Ann Frances.; Murray, Michael.
    Previous empirical evidence regarding the nature and magnitude of the relationship between equity returns and inflation has proven to be conflicting and inconsistent. Although several papers have considered this issue, there is still a lack of consensus as to the nature of the relationship between equity returns and inflation. This represents a considerable point of concern as it is this relationship that acts as an indicator of the historical efficacy of equities as an inflationary hedge. While the classical theory dating back to the 1930’s dictates that equities should function as an effective hedge against inflation because they are based on underlying assets with a fixed real value, a substantial number of studies have obtained results that contradict this theory. Many attempts have been made to explain this phenomenon and to resolve the debate since the 1980’s, notably with the application of cointegration theory andmethods (which were developed in the 90’s). Despite advances in econometrics, the issue remains unresolved on an international scale, with conflicting results still occurring in recent studies (Chaves and Silva, 2018; Bhanja and Dar, 2018; Al-Nassar and Bhatti, 2018). The literature that focuses on the South African case is a typical example of the disparity: relatively modern studies using fairly similar statistical approaches find vastly differing results as to the capacity for equities to act as an inflationary hedge, including findings of positive and negative results (Alagidede and Panagiotidis, 2010; Khumalo, 2013), as well as approaches that failed to produce conclusive results (van Rooyen and Jones, 2018). This thesis aims to resolve the issue for the South African case in order to determine whether or not equities have acted as a historically effective inflationary hedge. The South African economy represents a perfect natural experiment for the study due to its high volatility, especially in terms of macroeconomic indicators such as inflation, over the past thirty-five years. The analysis makes use of the Consumer Price Index (CPI) as a proxy for inflation and the Johannesburg Stock Exchange’s All Share Index (ALSI) as a proxy for equity returns over the period 1980 to 2015. The study is undertaken as a collection of publications that each seek to address particular issues, mostly of an econometric nature, that arise when studying the relationship. The first of these papers deals with the disparity in the South African economy regarding the order of integration of the two variables and seeks to provide a comparative analysis with previous studies. Further, the research contained in paper one seeks to identify possible explanations for the conflicting results in previous studies. The study finds that a significant, positive cointegrating relationship between inflation and equity returns exists in South Africa, at least when using conventional cointegration techniques, implying that equities have exhibited the historical capacity to act as an effective historical hedge against inflation, in contrast to the findings of much of the literature. Further, it resolves previous issues with differing findings as to the orders of integration of the variables, which represents a particularly prevalent problem in studies using South African data. While these initial findings would appear to lend support to the conventional theory that equities are able to act as an effective inflationary hedge in South Africa, when examining the issue more deeply it becomes evident that this finding may potentially be impacted by the inherent assumptions of the models employed. Based on the results of previous studies and the results of the first paper, the second paper posits that the equity- inflation relationship is both time and country dependent, potentially contributing to the aforementioned disparities in the existing literature. The implication of potentially flawed model assumptions is that the results of the first paper may be inaccurate (the model risk of a poor model choice giving unreliable results). As a result of this potential limitations bias, the remaining papers of this doctoral dissertation delve into the assumptions behind the classic model, reflecting more deeply on the nature of the data employed and seeking to determine if this relationship holds when various, arguably more realistic, alternate assumptions are considered. The first of these assumptions that is critiqued is that the relationship is time-invariant, such that the equity-inflation relationship does not exhibit variance over time. In an economy such as South Africa, which has shown exceptional macroeconomic volatility, such an assumption may well be inaccurate and is likely to have reduced the integrity of the conventional tests. Relaxing the assumption of time-invariance allows one to consider that the relationship may have experienced shifts over time as a result of exogenous shocks. This idea is tested by investigating the possibility of structural breaks in the individual time series, as well as in the relationship itself. Structural breaks here refer to an unexpected shift in a time series that can lead to forecasting errors, compromising the reliability of the model. Should a model rely on the assumption of time-invariance it is unable to account for the existence of such structural breaks, leading to compromised results. In the second paper, significant evidence for the existence of structural breaks was found in the case of both variables as well as in the overall relationship. Using the most significant structural break as a breakpoint and investigating the relationship preceding and subsequent to the break pointed to clear evidence that the relationship does change over time. As previous studies have generally assumed the series do not contain breaks, the assumption of time-invariance in previous work may have led to inherently flawed conclusions. However, what this second paper was able to demonstrate, was that even when accounting for breaks, equities maintained their capacity to act as a hedge against inflation in South Africa on either side of that structural break. Further, cointegration testing allowing for structural breaks indicated that the overall relationship was significant and positive and affirmed the prior conclusion that equities are an effective inflationary hedge in the long-run. That is, even when relaxing the assumption of time-invariance and accounting for structural breaks, the overall conclusion for the South African case – that equities are able to perform a hedging function against inflation – remains true. This thesis then continues by developing on this idea of addressing the previous assumptions that may affect this type of analysis, building towards a final, more robust, conclusion. Two additional assumptions remain which require consideration. In recent literature the question of asymmetric adjustment has arisen, including in the analysis of the relationship between equity returns and inflation. Such studies have aimed to deal with the idea that there is no compelling reason to assume that adjustments of the relationship between equity returns and inflation have necessarily been symmetric. Further, it is possible that the relationship may have been subject to a threshold effect, where it exhibits different characteristics depending on whether stocks are underpriced or overpriced relative to goods. It was shown that the adjustment coefficients differ substantially depending on whether they are above or below a certain threshold, and thus that the assumption of linear adjustment is flawed as the relationship exhibits asymmetric adjustment in reality. Further testing for asymmetric adjustment and allowing for such adjustments in the relationship led to the conclusion that the relationship has experienced asymmetric adjustment over the sample period and that the relationship between equity returns and inflation is more appropriately modelled using threshold cointegration techniques. Such findings drastically improve our understanding of the dynamics of the equity returns-inflation relationship and emphasize the importance of accounting for these factors in similar studies. The weakness in previous cointegration testing is somewhat exposed by the strength of the evidence of asymmetric adjustment and effectively questions the findings of the majority of the previous literature which has relied on these techniques. The model far more accurately estimates the relationship between equity returns and inflation and provides new evidence that it experiences a measure of variance around an endogenously determined threshold. Due to the relative power of the model as well as the fact that it has accounted for these factors it can be stated with far greater certainty that South African equities are able to provide an effective hedge against domestic inflation. The evidence of threshold effects is of importance to investors and policy makers, as it is at this point that the adjustment coefficients will vary in terms of their response to exogenous shocks. This is particularly important in the context of this thesis because of the evidence of multiple structural breaks in the cointegrating relationship (found in the second publication) indicating that the relationship has been affected by exogenous shocks at multiple points over the sample period. These factors, namely structural breaks, threshold effects and asymmetric adjustment, are a likely reason why previous studies, on an international scale, have exhibited such conflicting results. Should these studies be reconsidered to incorporate such effects, it would vastly improve the robustness of the results of these studies. It should be noted that the magnitude of the relationship is likely to differ across countries and time periods due to the variation in structural dynamics and macroeconomic conditions. It is therefore improbable that some standard measure of the relationship, such as the conventional theory by Fisher, would accurately estimate the relationship regardless of the sample country or sample period, given the findings in this thesis that the relationship is affected by exogenous factors. Due to the findings of asymmetric adjustment in the third research paper, it is not only the magnitude of the relationship that will cause varied responses, but also potentially the direction of the adjustment. This is investigated further in the fourth paper of this thesis, which aims to disaggregate the overall adjustment coefficient in order to better understand the effects of positive and negative adjustments when they differ substantially from the long-term aggregate relationship. Disaggregating the overall adjustment coefficient into its positive and negative components provided a novel understanding of the dynamics of the relationship. The results of the disaggregation were surprising due to the magnitude of the disparity between the positive and negative adjustments coefficients and indicated that it is important to consider the possibility of imminent fluctuations in inflation when best deciding how to hedge against it. Collectively however, this thesis has proven that equities are able to function as an effective long-run hedge against inflation in South Africa. Further this thesis demonstrates that the inherent assumptions in conventional cointegration techniques, especially those of time-invariance and symmetric adjustment are flawed and have likely contributed to the disparities in the previous literature.
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    The interplay of different types of capital on amplifying small business entrepreneurship performance in Cameroon: a case of Douala and Yaounde.
    (2019) Kabange, Martin Malunda.; Mahadea, Darma.
    There cannot be a firm without entrepreneurship, and for the exercise of effective entrepreneurship, entrepreneurial capital is indispensable. Drawing from the resource-based theory, this study assesses the interplay of social, human and financial capital on business performance in Cameroon, using a Structural Equation Modelling (SEM) approach and Principal Component Analysis (PCA). These three elements together make up the building blocks of entrepreneurial capital. The study uses a sample of 364 firms. Performance is examined in terms of growth in sales, profits and employment. The PCA isolates financial capital (FC), social capital (SC), and human capital (HC) as critical components influencing performance. HC is examined under Entrepreneur-Owner Human Capital (OHC) and LabourEmployee Human Capital (EHC). The SEM results indicate that OHC has the strongest significant effect on performance (weight 0.528), followed by FC (weight 0.420), EHC (weight 0.207) and SC (weight 0.120). Furthermore, the SEM indicated a positive and significant correlation between OHC and EHC (r = 0.61); between FC and EHC (r = 0.56); between FC and SC (r = 0.40); between OHC and SC (r = 0.34) and between SC and EHC (r = 0.32). Different elements of entrepreneurial capital complement each other in influencing performance. Investigating the constraints to business performance, five major obstacles were identified, namely: ‘financial and managerial skills’, ‘inadequate inputs’, ‘infrastructure’, ‘transaction costs and regulations’ and ‘credit access’. The study also looked at the influence of government support, regulations, and private financial institutions in hindering or amplifying business performance, using a multiple linear regression model (MLRM). The results show that ‘government regulations’ (𝜷= -0.197, p=0.004), has the strongest adverse impact on performance in terms of sales revenue. Furthermore, ‘awareness of source of funds’ was found to significantly amplify business performance in terms sales revenue (𝜷= 0.146; p=0.031) and in terms of profit (𝜷= 0.175; p=0.012). Government support was also significant to performance, in terms of labour employment (𝜷= 0.601; p=0.000); sales revenue (𝜷= 0.178; p=0.009), and profit (𝜷= 0.175; p=0.012). Government regulations have a consistently negative influence on performance, even when using different indicators.
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    Capital flow volatility, financial deepening and capital market performance in low-income countries.
    (2018) Mamvura, Kuziva.; Sibanda, Mabutho.; Rajaram, Rajendra.
    This study sheds light on the sources and impact of foreign capital flow volatility and its directional linkages with financial deepening and capital market performance in low-income Southern African Development Community (SADC) countries. It employs decomposed quarterly data on net foreign capital flows for a period spanning 16 years from 2000 to 2015. Decomposed net capital flows capture the dynamics of both inflows and outflows while taking domestic and foreign investors’ contribution to the dynamics of capital flow volatility into account. The study is unique in that it uses contemporary panel data regression methods to investigate the behavior of capital flow volatility, financial deepening and capital market performance in low-income SADC countries. Firstly, the panel autoregressive distributed lag (P-ARDL) model reveals that both portfolio flow and remittance flow volatility are significantly determined by domestic price level, money supply, real Gross Domestic Product (GDP) and interest rates. Global GDP significantly affects portfolio volatility but has no significant effect on remittance volatility. Only domestic and global interest rates are negatively related to remittance and portfolio volatility in these economies. Secondly, the panel vector error correction model (P-VECM) investigation reveals a bi-directional relationship between remittance flow volatility and financial deepening and also indicates a one-way causal relationship from portfolio flow volatility to financial deepening. Finally, the panel vector auto regression (P-VAR) model finds that global shocks are rapidly transmitted to the domestic economy and not vice versa. Shocks in portfolio volatility account for significant variations in money supply and lead to a decline in general price levels from the short run to the long run. Additionally, changes in remittance volatility impact directly and significantly on domestic interest rates and consumer price levels. Remittance volatility impacts positively on real GDP while portfolio volatility exert negative pressure in SADC countries. In order to achieve stable and constant capital flows, policy makers should adopt programs that lead to financial growth, price and interest rate stability. Given the paucity of macro-financial studies on the region, the study provides meaningful empirical evidence on the behavior and impact of portfolio and remittance flows in low-income SADC countries.
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    Inter-regional child mortality, programme efficiency, and throughput: an evaluation of the Ethiopian health extension programme.
    (2018) Gebresilassie, Yibrah Hagos.; Nyatanga, Phocenah.
    Background: Despite the remarkable improvement Ethiopia had made in the overall health outcomes, such as reducing under-five child mortality rate, there were substantial variations in the rate of progress across its administrative regions over different periods of time. Moreover, compared to many other developing countries, the progress that Ethiopia made in child mortality reduction remained low, and accounted for three percent of the share of global under-five child deaths in 2015. While the community-based health extension programme contributed to improving health outcomes of the population, such as reducing child mortality, access to and use of basic healthcare services are limited, with significant variations across regions of the country. Much less is known about the factors affecting the inter-regional variations in under-five child mortality: how efficient the health extension programme is in delivering basic healthcare services to its rural societies across regions and the determinant factors affecting the health extension programme beneficiary households' graduation in rural settings of Ethiopia. This study is therefore the first attempt to explore determinants of inter-regional differentials in under-five child mortality, and to evaluate the efficiency and productivity changes of the community-based health extension programme in rural areas of Ethiopia at the national level. This study addresses three specific objectives. These are: i) to examine the determinant factors affecting the inter-regional differentials in under-five child mortality. ii) to evaluate the efficiency and productivity growth (changes) of the community-based health extension programme. iii) to identify the determinant factors influencing the health extension programme beneficiary households' graduation. Methodology: This study employed cross-sectional secondary data from the Ethiopian demographic and health survey, 2016, for a total of 4,200 deaths of under-five children. It also utilised data from the regional health bureaus of Ethiopia, constituting a sample of 1,552 health posts and 4,244 rural households for the years 2013 and 2014. The statistical methods employed include the extended Oaxaca-Blinder decomposition to count data model, Data Envelopment Analysis, Tobit, ordinary least square, and the multiple logistic regressions. Results: The main findings, which addressed the first objective of the study, revealed that the regional differentials in under-five child mortality were due to socio-economic factors (such as mother's age at first birth, antenatal healthcare services, parental education, households' wealth status, and household size), proximate factors (such as child's birth spacing, child's birth order, and size of the child at birth), and environmental factors (such as place of delivery). However, their relative contributions in explaining the regional differences varied significantly within and across groups in the regional comparisons. The main findings, which addressed the second objective of the study, indicated that there was a substantial variation in technical and scale efficiency estimates among health posts, both across the regions and over periods of time. The results indicated that about 5.67 percent of health posts were a variable return to scale (VRS) technical efficient, with an average technical efficiency estimate of 79.6 percent in 2014. Moreover, most of the health posts (91.24 percent) were operating below their optimal scale size, indicating a potential for improving the efficiency of the health extension programme by improving the scale size, the efficiency of the scale as well as technically inefficient health posts. Furthermore, the overall productivity change increased by about 6.7 percent due to the technological progress. In a subsequent study, results of the regression analysis indicated that households' travel distance to the nearest health posts, provision of supportive supervision to the health extension workers, religion, and region of residence of the health extension workers affected the disparities in technical efficiency estimates among the health posts. The main findings addressing the third objective of the study explained the reason behind the rate of graduating households as model households. The results indicated that family size, head of the household head, parental level of education, households' access to the agricultural extension programme, mothers' age, and the professional level of the health extension workers were the major determinant factors affecting the health extension programme beneficiary households' graduation. Conclusion: The explained part of the regional differentials in under-five child mortality was due to differences in socio-economic, proximate, and environmental factors among the regions, with significant differences in the magnitude of the effect. Most of the health posts were operating below their optimal scale size, with substantial variations in technical and scale efficiency estimates, suggesting potential room for improving the efficiency of the health extension programme. Therefore, this study suggests the need for sustained efforts with a due focus on improving households' economic status, maternal education, sustained in-service training and supportive supervision provision to the health extension workers across regions of the country.
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    Mineral commodity exports, exchange rates and growth: a case study of gold and other minerals in South Africa.
    (1995) Mainardi, Stefano.; Holden, Merle Gwendoline.
    This thesis aims at assessing the role of mineral exports for a developing economy, with a focus on commodity prices and supply, exchange rates, and growth. The study is especially concerned with the case of gold in South Africa, which is considered within a broader theoretical and empirical framework, encompassing other minerals and countries. The contradictory alternatively seen as effects of a a blessing or large mining sector, a curse for economic development and policy-making (or, rather, as a mixed blessing), provide the thread underlying the study. A growth model of a mineral developing economy is initially proposed, and tested over a 25-year period. A double weak-convergence equilibrium, and related differences across countries, are found to be partly explained by the performance of international prices of the main export minerals. A literature review draws attention to other development issues, with emphasis on exchange rate analysis. The picture ii one of controversial hypotheses and empirical findings, which are largely explained by objective differences in such aspects as mineral, country, and period analysed. Within this context, the thesis subsequently evaluates the role of the gold price for the South African real and nominal exchange rates in the 1980s and early 1990s. Results, based on econometric techniques applied to monthly observations, point to the gold price as a determinant of both exchange rates in South Africa, even if with some variation over the sample period. A recursive equation model is constructed to link South African gold mining to a macroeconomic framework. This model allows reconsideration of the above results with a new approach, employing a different time period and observation frequency (1970- 1994 annual data), and draws implications in terms of real exchange rate misalignment and economic growth. The results highlight the potential for a moderate recovery in gold mining and the need for adequate development strategies for the mining sector in South Africa, in view of the challenging requirements of the near future. The last part of the study turns to examine company-level statistics for gold and other minerals, so as to test hypotheses on the supply behaviour of mines which are ignored, or at best presumed, by studies exclusively relying on macro data. Results, based on pooled data, suggest the relevance of microeconomic, geological and, in some cases, institutional factors to account for different mineral supply responsiveness.