African Finance Journal - Volume 15, Issue 1, 2013
Volumes & issues
Volume 15, Issue 1, 2013
Author Lumengo Bonga-BongaSource: African Finance Journal 15, pp 1 –12 (2013)More Less
This paper assesses the long-term relationship between consumption spending and stock market wealth in the context of the life-cycle hypothesis in South Africa. A distinction is made between the expected and unexpected changes in stock market wealth and their effects on consumption spending. The Johansen and the dynamic ordinary least square (DOLS) cointegration methods are used to assess the long-term relationship between consumption spending and stock market wealth, and thus the effect of the expected change in stock market wealth on consumption spending. Moreover, the impulse response function obtained from the identified vector autoregressive model (VECM) is used to assess the impact of the unexpected or shocks to stock market wealth on consumption spending. The results of the paper show a small positive reaction of consumption spending to expected and unexpected changes in stock market wealth in South Africa. The paper attributes this weak reaction of consumption spending to stock market wealth to the possibility of small participation of households in stock exchange investment opportunities in South Africa.
Fiscal incentives for FDI and infrastructure development : economic diversification options for SADC countriesAuthor Olalekan YinusaSource: African Finance Journal 15, pp 13 –35 (2013)More Less
This paper attempts to investigate the effects of fiscal incentives on manufacturing Foreign Direct Investment (MANFDI) in 13 Southern African Development Community (SADC) countries for the period 1995 to 2007. Using pooled ordinary least squares (POLS) and panel least squares estimation techniques, the results indicate that availability of infrastructure, skilled labour, and degree of openness of the economy are significant drivers of MANFDI to SADC region. However, taxes on international trade, overvalued real exchange rate and macroeconomic instability have negative effects on MANFDI. Fiscal incentives alone are not significant determinants of MANFDI to SADC. However, fiscal incentives interacting with infrastructure are positively significant in explaining MANFDI. The paper concludes that in seeking to attract manufacturing FDI to SADC, priority should be given to infrastructure development and exchange rate policy design and management to avoid loss of competitiveness. Fiscal incentives are only complementary.
Author Jonathan ChipiliSource: African Finance Journal 15, pp 36 –55 (2013)More Less
Monetary policy and foreign exchange intervention reaction functions are estimated for Zambia over the period 1995.01-2008.12 using GMM to determine the extent to which the central bank takes into account in its policy decisions, output and inflation deviations from trend and target as well as changes in exchange rate volatility. While monetary policy stabilises inflation and accommodates output fluctuations, the policy response to inflationary pressures is relatively low. Thus, a comprehensive review of the current monetary targeting framework is required to enhance the inflation control objective. Exchange rate volatility is a dominant factor in both monetary policy and foreign exchange intervention decisions.
Source: African Finance Journal 15, pp 56 –81 (2013)More Less
This paper explores financial market convergence in East African economies by analysing the long-run volatility trends in the currencies of this region. In particular, a Component-GARCH model is estimated, which is able to distinguish short- and long-run volatility dynamics. Common movement of the long-run component is in turn used to infer if financial and economic convergence is occurring. The empirical results do not suggest the existence of a common volatility process in East African foreign exchange markets. Overall volatility trends of each currency appear to be largely country specific, suggesting that the introduction of a currency union may be premature.
Source: African Finance Journal 15, pp 82 –104 (2013)More Less
This study examined the empirical relationship between stock market volatility and non-performing loans (NPL) of banks using the Exponential Generalized Autoregressive Heteroscedasticity (EGARCH) model. Taking into account the excess kurtosis in high frequency data, it estimated EGARCH model using generalized error distributions (GED). Results indicated a positive relationship between stock volatility and NPL. In addition, we found evidence to support an adverse asymmetric reaction with negative shock, on the average, increasing volatility more than the positive.