Mineral commodity exports, exchange rates and growth: a case study of gold and other minerals in South Africa.
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Date
1995
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Abstract
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.
Description
Doctoral Degree. University of KwaZulu-Natal, Pietermaritzburg.