African Finance Journal - Special issue 1, January 2009
Volumes & issues
Special issue 1, January 2009
Author Smile DubeSource: African Finance Journal 2009, pp 1 –24 (2009)More Less
The paper examines the relationship between inflows (FDI, portfolio plus other investment) to outflows (dividends, branch profits and interest) using the bounds/ARDL/bounds cointegration test and the Toda and Yamamoto (1995) Granger non-causality test. From the ARDL test, there is a long run relationship between FDI and associated outflows. We find no such relationship between portfolio, other investment, and associated outflows. Causality tests show that FDI Granger causes outflows (dividends, profits and interest). There is bidirectional causality between portfolio and other investment and outflows. The results suggest that FDI inflows do not always have positive effects for developing countries.
Author Christopher K. KiptooSource: African Finance Journal 2009, pp 25 –44 (2009)More Less
This study sought to establish the effects of RER volatility on Kenya's international trade over the period 1993-2007 using the cointegration analysis technique. The results suggested that there exists one cointegrating vector for both Kenya's real exports and imports and their respective fundamentals. The conclusion drawn by the study is that Kenya's export and import demand are determined more by the exchange rate volatility than by changes in relative prices and other control variables. These findings have two policy implications. First, policy makers should focus more efforts on export diversification. Second, the government should implement a stable exchange rate policy.
An augmented capital asset pricing model : liquidity and stock size in African emerging financial marketsSource: African Finance Journal 2009, pp 45 –73 (2009)More Less
This paper uses the illiquidity measure of Amihud (2002) in forming illiquidity estimates for South Africa, Kenya, Morocco, Egypt and London. These are used within an augmented CAPM framework to form risk firm illiquidity premiums in addition to premiums attributable to firm size. The evidence suggests that London and Johannesburg have the lowest cost of equity followed by Morocco and Egypt. While Kenya has the highest cost of equity the costs associated with a Main board listing are less than one third than those encountered on the fledgling Alternative Investment Market raising policy questions concerning the development of alternative markets.
Source: African Finance Journal 2009, pp 74 –94 (2009)More Less
This paper attempts the key research question of whether differences in financial development are significantly associated with differences in economic growth for 13 African countries using panel data from 1984-2002. A base model first regressed real per capita growth on control variables. Thereafter, financial sector development variables are introduced progressively. The Hausman's specification test favors the fixed effect model. The most plausible model shows that financial sector development variables contribute greatly in explaining economic growth: high coefficients associated with financial development variables. Thus efforts of developing financial sector should be emphasized, particularly for the African economies, for greater economic growth.
Integration of the South African equity market into the world major stock markets : implication for portfolio diversificationSource: African Finance Journal 2009, pp 95 –119 (2009)More Less
The paper investigates whether there are any benefits from international equity diversification for South African long term investors using daily stock market indices for seven world stock markets for the period 1995-2008. Firstly, pairwise portfolios are tested for long-run comovement using the bivariate cointegration approach. Wider portfolios are then tested for long-run comovement using the multivariate cointegration based on the Johansen and Juselius (1992) approach. While no bivariate cointegration exists between the South Africa and each of the selected world major equity markets for the entire 1995-2008, cointegration exist with US if a dummy is included. Multivariate cointegration analysis suggests that long-run comovement exists for some of the wider portfolios with most of long-run coefficients being negative. Overall, our findings show that integration of SA to the major world markets is weak suggesting that international portfolio diversification is potentially worthwhile for South African investors.
Source: African Finance Journal 2009, pp 120 –141 (2009)More Less
This paper focuses on Kenya's bonds market. It analyses the microstructure characteristics of the bonds market including volatility, efficiency and liquidity. The study captures both the Treasury bonds and corporate bonds markets. Findings show that the bonds market in Kenya has weak microstructure characteristics. This is not entirely unexpected, given that the market is in its initial stage in the development process of the bonds market in Kenya. The study establishes that these characteristics however differ across the treasury and corporate bonds and also across maturities. Treasury bonds market is found to be more liquid with higher traded value and more traded days as compared to the corporate bonds market. On the other hand, the corporate bond market is found to be less volatile and is comparable to the short end of the treasury bonds. The study establishes that treasury bonds returns have a higher volatility for the longer tenors than the shorter tenors. This may explain the preference that investors have shown for a long time for short tenor bonds to the longer tenor bonds.
Source: African Finance Journal 2009, pp 142 –161 (2009)More Less
This paper assesses the determinants and stability of money demand in Uganda during economic liberalization. Using dynamic ordinary least squares (DOLS) estimator cointegration method it is found that in the long run the main determinants of money demand are GDP, savings interest rate, inflation and foreign interest rate. There is evidence of currency substitution as agents take advantage of movement in foreign markets. In addition, using the Chow test it is found that money demand is stable both in the short and long run. The results have important implications for monetary policy conduct in the wake of continued economic liberalization.
Author Joel Hinaunye EitaSource: African Finance Journal 2009, pp 162 –178 (2009)More Less
This paper tests the causal relationship between financial development and economic growth in Namibia for the period 1980 to 2007. The analysis shows that there is evidence which points that financial development causes economic growth. It also shows that economic growth causes financial development. This suggests that Namibia should promote financial development or financial deepening as a strategy to enhance economic growth. At the same time, the country should also develop its real sector in order to promote economic development.