South African Journal of Economics

Publisher:: Wiley
Publication date:: 2021-02-01

ISBN:: 0038-2280

Issue Number

Latest documents

Non‐linear Effects of Inflation on Economic Growth in the Democratic Republic of the Congo
This paper presents one of the first empirical studies that employ the regression kink model with an unknown threshold to estimate the turning point in the relationship between inflation and economic growth. To deal with the asymptotic non‐normality of the regression function, we use a numerical delta bootstrap method and inference methods in the construction of confidence intervals for the regression function. Our estimated threshold suggests that, in the Democratic Republic of Congo, inflation rates lower than 17.2% would drive economic growth, but any inflation rate beyond that threshold will harm the growth. The Congolese policymakers should be aware of this threshold in the implementation of any inflation‐targeting policy instruments or strategies.
Macroeconomic Effects of an Ageing Population in Mauritius
The economic literature focuses mostly on faster ageing of population among developed countries; however, many developing countries experience even more dramatic pace of this process. Mauritius, with the median age of population higher than the world average since 1990s, represents a prominent example of such a case. In this paper, we analyse demographic developments in Mauritius and discuss their macroeconomic implications using an open‐economy OLG model with demographic shocks. We project that a decline in the Mauritian interest rate and net foreign assets to GDP resulting from ageing will be accompanied by a temporary increase in GDP, consumption and investment.
Beyond Borders: The Euro Crisis and Public Support for Monetary Integration in East Africa
We show that economic experiences in one part of the world affect proposed policies elsewhere. Specifically, we find that the recent crisis in the European Monetary Union (EMU) has impacted negatively the public support for the new proposed monetary union in the East African Community (EAC), with a more pronounced effect for less educated Kenyans. That external effect is robust to controlling for an array of other factors such as the expected economic benefits from the union, the desire to gain international influence as part of a larger community and the memory of an earlier failed EAC monetary union.
Business Cycles Synchronisation and Symmetries in the Transition to East African Monetary Union
Our paper explores the prospects for the proposed East African Monetary Union (EAMU) by employing rigorous empirical tools to analyse business cycles synchronisation, structural cross‐correlations, spectral decomposition and regional clusters to identify different cyclical episodes, periodicities and characterise the economic cycles of East African countries. We find that cyclical movements reflect various idiosyncratic, common, historical and external shocks in the region. Secondly, all countries appear to be structurally correlated with each other except for South Sudan and Burundi. Our results also observe that the contemporaneous co‐movements of East African Community (EAC) cycles with those of Kenya and Tanzaniaare procyclical with coincidental path shift, while the same EAC cycles appear to be acyclical with those of Burundi. Additionally, from the spectral decomposition, Kenyan cycles take 10 years to complete, while those of Tanzania and Rwanda take 8 years. Ugandan and Burundian cycles take approximately 5 years, while the cyclical frequency for South Sudan corresponds to 3.3 years. Finally, the cluster characterisation of countries reveals that South Sudan, Burundi and Rwanda form a group, while Kenya and Tanzania from a group distinct from the rest. We urge the member countries to prioritise policies on regional risk‐sharing and adjustment mechanisms, in addition to establishing credible institutional infrastructure that ensures surveillance and enforcement of convergence conditions adopted in EAMU protocol.
Issue Information
Media‐Based Sentiment Indices as an Alternative Measure of Consumer Confidence
In this paper, we consider the feasibility of constructing online sentiment indices, using large amounts of media data, as an alternative to the conventional survey method used to create the consumer confidence index in South Africa. A clustering framework is adopted to provide an indication of possible candidate sentiment indices constructed from a combination of different text sources and dictionaries that best mimic the traditional survey‐based consumer confidence index from the South African Bureau for Economic Research (BER). The results conclude that it is possible to create an index using sentiment analysis using online editorial data that does resemble the BER’s consumer confidence index. The different media‐based sentiment indices (MSI) show a significant level of correlation and co‐movement with the BER’s CCI. Impulse responses and cross‐correlation functions indicate that the MSI could potentially lead the survey‐based method up to two quarters. Furthermore, Granger‐causality tests show that the media‐based indices are good predictors of future consumer confidence index values. The results provide motivation for further study on the use of sentiment‐based techniques and online media data sources to track consumer confidence within an emerging market such as South Africa.
Spillovers of the Conventional and Unconventional Monetary Policy from the US to South Africa
This paper assesses the effect of US monetary policy on South Africa during the period 1990–2018. We separately analyse and compare the effect of conventional monetary policy, before the Global Financial Crisis, and unconventional monetary policy, after the US monetary policy reached the zero‐lower bound. Our impulse response function results indicate that monetary policy in South Africa responds mainly to local inflation, economic activity and financial conditions. While there is strong correlation between the global and South African financial cycle, the financial cycle is not transmitted to the real economy because of the sluggish response of industrial production and domestic credit, especially after the global financial crisis. We see this as an indication of the effects of structural issues to the real economy and constrained households’ balance sheet which has prevented the local economy to take advantage of low local interest rates and the global economic recovery after the crisis.
Inflation‐Output Trade‐Off in South Africa: Is the Phillips Curve Symmetric?
This study sets out to investigate whether the inflation‐output trade‐off in South Africa is symmetric or asymmetric; and if asymmetric, whether it is convex or concave. A New Keynesian dynamic stochastic general equilibrium model calibrated on South African data reveals that a negative demand shock reduces inflation and output while a positive demand shock of the same magnitude leads to a smaller increase in inflation and a larger increase in output, indicating that the inflation–output relationship in the country is concave asymmetric. These findings corroborate estimation results of the inflation‐expectations augmented Phillips curve conducted using difference GMM on quarterly data.
Issue Information
Ocran, Matthew Kofi. Economic Development in the Twenty‐first Century. Lessons for Africa Throughout History; 2019; 412 pages. Cham: Palgrave Macmillan.