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- Volume 13, Issue 1, 2010
South African Journal of Economic and Management Sciences - Volume 13, Issue 1, 2010
Volumes & issues
Volume 13, Issue 1, 2010
Source: South African Journal of Economic and Management Sciences 13, pp 1 –7 (2010)More Less
Recent studies have pointed out that trade liberalisation leads to technological spillovers, which tend to improve the efficiency of the domestic research and development (R&D) sector, and ultimately boost economic growth. In this paper, we theoretically formalise the above-mentioned relationship between trade openness and growth, via knowledge spillover in the R&D sector. We show that, under certain conditions, an increase in the degree of openness not only enhances growth, but also improves the standard of living. The study, thus, prescribes policies of developing and improving the domestic R&D sector in order to reap the benefits of trade liberalisation.
Author Abu Bakarr TarawalieSource: South African Journal of Economic and Management Sciences 13, pp 8 –25 (2010)More Less
The main focus of this paper is to examine the impact of the real effective exchange rate on economic growth in Sierra Leone. First an analytical framework is developed to identify the determinants of the real effective exchange rate. Using quarterly data and employing recent econometric techniques, the relationship between the real effective exchange rate and economic growth is then investigated. A bivariate Granger causality test was also employed as part of the methodology to examine the causal relationship between the real exchange rate and economic growth. The empirical results suggest that the real effective exchange rate correlates positively with economic growth, with a statistically significant coefficient. The results also indicate that monetary policy is relatively more effective than fiscal policy in the long run, and evidence of the real effective exchange rate causing economic growth was profound. In addition, the results showed that terms of trade, exchange rate devaluation, investment to GDP ratio and an excessive supply of domestic credit were the main determinants of the real exchange rate in Sierra Leone.
Author Philippe BurgerSource: South African Journal of Economic and Management Sciences 13, pp 26 –49 (2010)More Less
This paper identifies the basic empirical characteristics and changes of the South African business cycle since 1960. As such, the paper examines changes in volatility as well as the co-movement between several national account variables and real GDP. To examine the co-movements the paper follows Kydland and Prescott, Gavin and Kydland as well as Bergman, Bordo and Jonung and uses correlation coefficients and Granger causality tests. Following Ramos, the paper extends the results of the Granger causality tests using variance decomposition analysis in the context of a VAR (vector auto regression) to establish the contribution that selected national account variables make to the h-period-ahead forecast error variance of themselves and the other variables included in the VARs. The paper indicates that since 1994 volatility in the South African economy decreased significantly, while durable consumption appears to lead the business cycle.
The determinants of public expenditure and expenditure on education in particular in a selection of African countries : economicsSource: South African Journal of Economic and Management Sciences 13, pp 50 –61 (2010)More Less
This study reports on research aimed at measuring the drivers behind public expenditure with specific reference to education expenditure in Africa. The empirical estimations are carried out using a public choice model on a panel of 15 selected African countries over the period 1995-2004. The results show that government expenditure on education is resilient to shocks and the education sector is not seriously affected by allocative changes that favour corruption. Expenditure on education in the countries included in the study generally complies with the guidelines set by the IMF in terms of their fiscal adjustment programmes.
Source: South African Journal of Economic and Management Sciences 13, pp 62 –75 (2010)More Less
This paper simulates the price effects of the proposed Ferro Industrial Products (Ferro) and Powder-Lak merger in order to suggest the role that merger simulation models should play in South African merger control. Merger simulation can provide support to the Commission's analysis by: focusing parties' attentions on verifiable economic arguments; making transparent the values of the key parameters and assumptions in the Commission's analysis; producing quantitative estimates of the results of a given transaction; and indicating the amount of resources to allocate to proposed merger cases. However, it offers only one piece of evidence in a case and its results must be interpreted with an understanding of the potential limitations.
Making sense of the disclosure of latent defects in financial statements and company acquisition contracts : law and economicsAuthor Cornelius KilianSource: South African Journal of Economic and Management Sciences 13, pp 76 –84 (2010)More Less
This paper analyses the statement made by the South African Appeal Court Judge Holmes in the Phame v Paizes (1973) case and, using economic and unique South African legal principles, it examines the true legal nature of a contract to regulate company acquisitions.1 Two solutions are offered for financial managers in South Africa: (1) the contract to regulate company acquisitions is a forward contract and (2) the difficulty in identifying latent defects should not be grounds for reducing the price paid for a company or enterprise in the South African legal system.
Source: South African Journal of Economic and Management Sciences 13, pp 85 –97 (2010)More Less
This article investigates the application of capital budgeting techniques and the incorporation of risk into the capital budgeting process among a sample of South African industrial firms listed on the JSE Securities Exchange for at least ten years. Previous international and local research on this topic indicated a preference for the internal rate of return (IRR) as a capital budgeting method over the net present value (NPV), and that risk incorporation was relatively rarely incorporated into the capital budgeting process. The results of this study indicate that the NPV is just as popular as, and sometimes more so than, the IRR. Furthermore, compared to previous studies, risk is incorporated into evaluating capital budgeting projects more often. Sensitivity analysis is the most popular method, but adjustments to the cash flows and discount rate are becoming more popular. During the last decade the use of non-financial criteria to accept or reject a project has also increased in South Africa.
Accounting ethics - an empirical investigation of managing short-term earnings : financial managementAuthor Leonie JoosteSource: South African Journal of Economic and Management Sciences 13, pp 98 –111 (2010)More Less
Short-term earnings are managed in most, if not all, companies. The management of short-term earnings is vulnerable to misinterpretation, manipulation or deliberate deception even if these misleading accounting practices are prohibited by accounting regulations. Hence, the problem with managing short-term earnings is that it becomes an ethical practice, regardless of who is or may be affected by the practice or the information that flows from it. As a result of the publicity received by Enron and WorldCom on financial failures and fraud, and the subsequent legislation, the Sarbanes-Oxley Act in 2002, students are expected to understand the morality issues of earnings-management practices. Therefore, the ethics of earnings-management practices affect the accounting educator. Accounting students and business managers were surveyed and the findings indicated that there is no significant difference between gender regarding the ethicality of twenty earning-management practices. The results, however, show that there is a significant difference between the perceptions of business managers and students regarding the morality of earnings-management practices. However, no significant differences were found between genders.