Credit extension in South Africa : a business cycle perspective for the period 1985 to 2009
- Fourie, Leila, Botha, Ilsé, Mears, Ronald
- Authors: Fourie, Leila , Botha, Ilsé , Mears, Ronald
- Date: 2011
- Subjects: Procyclicality , Cointegration , Structural vector autoregression (SVAR) , Vector autoregression (VAR) , Macroeconomic business cycle , Bank-granted credit
- Type: Article
- Identifier: uj:5814 , ISSN 1993-8233 , http://hdl.handle.net/10210/7822
- Description: This paper investigates and quantifies the relationship between the macroeconomic business cycle and bank-granted credit in South Africa for the period 1985 to 2009. The main question that this research seeks to answer is what role do banks play in amplifying the business cycle and what is the impact of this on the macroeconomy? The outcomes of the econometric model support the hypothesis that a positive relationship exists between bank-extended credit and the business cycle. The vector autoregression technique was used to prove the relationship between credit and the underlying cycle. The analysis shows that a two-way relationship exists between credit and the coincident indicator, credit and insolvencies and credit and prime. Results from the vector error correction model show a significant short-run relationship of equilibrium in the cointegrating equation between credit and the coincident indicator. This corroborates the underlying theory that credit is a unifying variable that rapidly responds to shocks emanating from the dynamic interaction of cointegrating variables in the economy.
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- Authors: Fourie, Leila , Botha, Ilsé , Mears, Ronald
- Date: 2011
- Subjects: Procyclicality , Cointegration , Structural vector autoregression (SVAR) , Vector autoregression (VAR) , Macroeconomic business cycle , Bank-granted credit
- Type: Article
- Identifier: uj:5814 , ISSN 1993-8233 , http://hdl.handle.net/10210/7822
- Description: This paper investigates and quantifies the relationship between the macroeconomic business cycle and bank-granted credit in South Africa for the period 1985 to 2009. The main question that this research seeks to answer is what role do banks play in amplifying the business cycle and what is the impact of this on the macroeconomy? The outcomes of the econometric model support the hypothesis that a positive relationship exists between bank-extended credit and the business cycle. The vector autoregression technique was used to prove the relationship between credit and the underlying cycle. The analysis shows that a two-way relationship exists between credit and the coincident indicator, credit and insolvencies and credit and prime. Results from the vector error correction model show a significant short-run relationship of equilibrium in the cointegrating equation between credit and the coincident indicator. This corroborates the underlying theory that credit is a unifying variable that rapidly responds to shocks emanating from the dynamic interaction of cointegrating variables in the economy.
- Full Text:
Credit extension in South Africa: a business cycle perspective for the period 1985 to 2009
- Fourie, Leila, Botha, Ilsé, Mears, Ronald
- Authors: Fourie, Leila , Botha, Ilsé , Mears, Ronald
- Date: 2011-12
- Subjects: Business cycle , Credit , Procyclicality , Vector autoregression (VAR) , Cointegration , Structural vector autoregression (SVAR)
- Type: Article
- Identifier: http://ujcontent.uj.ac.za8080/10210/368251 , uj:5815 , ISSN 1993-8233 , http://hdl.handle.net/10210/7823
- Description: This paper investigates and quantifies the relationship between the macroeconomic business cycle and bank-granted credit in South Africa for the period 1985 to 2009. The main question that this research seeks to answer is what role do banks play in amplifying the business cycle and what is the impact of this on the macroeconomy? The outcomes of the econometric model support the hypothesis that a positive relationship exists between bank-extended credit and the business cycle. The vector autoregression technique was used to prove the relationship between credit and the underlying cycle. The analysis shows that a two-way relationship exists between credit and the coincident indicator, credit and insolvencies and credit and prime. Results from the vector error correction model show a significant short-run relationship of equilibrium in the cointegrating equation between credit and the coincident indicator. This corroborates the underlying theory that credit is a unifying variable that rapidly responds to shocks emanating from the dynamic interaction of cointegrating variables in the economy.
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- Authors: Fourie, Leila , Botha, Ilsé , Mears, Ronald
- Date: 2011-12
- Subjects: Business cycle , Credit , Procyclicality , Vector autoregression (VAR) , Cointegration , Structural vector autoregression (SVAR)
- Type: Article
- Identifier: http://ujcontent.uj.ac.za8080/10210/368251 , uj:5815 , ISSN 1993-8233 , http://hdl.handle.net/10210/7823
- Description: This paper investigates and quantifies the relationship between the macroeconomic business cycle and bank-granted credit in South Africa for the period 1985 to 2009. The main question that this research seeks to answer is what role do banks play in amplifying the business cycle and what is the impact of this on the macroeconomy? The outcomes of the econometric model support the hypothesis that a positive relationship exists between bank-extended credit and the business cycle. The vector autoregression technique was used to prove the relationship between credit and the underlying cycle. The analysis shows that a two-way relationship exists between credit and the coincident indicator, credit and insolvencies and credit and prime. Results from the vector error correction model show a significant short-run relationship of equilibrium in the cointegrating equation between credit and the coincident indicator. This corroborates the underlying theory that credit is a unifying variable that rapidly responds to shocks emanating from the dynamic interaction of cointegrating variables in the economy.
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Determinants of private equity investments across BRICS countries
- Authors: Ndlwana, G. , Botha, Ilsé
- Date: 2018
- Subjects: Determinants , Private equity , Venture capital
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/278344 , uj:29867 , Citation: Ndlwana, G. & Botha, I. 2018. Determinants of private equity investments across BRICS countries.
- Description: Abstract: The determinants of private equity investments (particularly venture capital investments) have been studied extensively across developed economies. This is however not the case among emerging markets. Hence, this study primarily focuses on the determinants of private equity (inclusive of all sub-classes) among the BRICS countries. Six macroeconomic and market related explanatory variables, including the corruption perception index are studied. Private equity funds raised across BRICS are used as the proxy for private equity investments. These variables are studied using panel data analysis predicated on the fixed effects model over an eight-year observation period. The study reveals that GDP growth and real interest rate are both statistically significant and positively related to private equity investments across the BRICS countries. Furthermore, market capitalization growth and corporate tax rates are statistically significant and are both found to be negatively related to the dependent variable.
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- Authors: Ndlwana, G. , Botha, Ilsé
- Date: 2018
- Subjects: Determinants , Private equity , Venture capital
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/278344 , uj:29867 , Citation: Ndlwana, G. & Botha, I. 2018. Determinants of private equity investments across BRICS countries.
- Description: Abstract: The determinants of private equity investments (particularly venture capital investments) have been studied extensively across developed economies. This is however not the case among emerging markets. Hence, this study primarily focuses on the determinants of private equity (inclusive of all sub-classes) among the BRICS countries. Six macroeconomic and market related explanatory variables, including the corruption perception index are studied. Private equity funds raised across BRICS are used as the proxy for private equity investments. These variables are studied using panel data analysis predicated on the fixed effects model over an eight-year observation period. The study reveals that GDP growth and real interest rate are both statistically significant and positively related to private equity investments across the BRICS countries. Furthermore, market capitalization growth and corporate tax rates are statistically significant and are both found to be negatively related to the dependent variable.
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Direct versus indirect forecasting of the defined real exchange rate of South Africa
- Pretorius, Marinda, Botha, Ilsé
- Authors: Pretorius, Marinda , Botha, Ilsé
- Date: 2010
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5525 , ISSN 16059786 , http://hdl.handle.net/10210/13931
- Description: The real exchange rate of South Africa can be forecasted using the direct or the indirect methods of forecasting. This article compares the forecasting results of direct and indirect forecasting of the real exchange rate by using two multivariate model. and a multivariate model. The direct models outperformed the indirect models in-sample and the indirect models generally outperformed the direct models out-of-sample. Given the closeness of the forecasting results, the modeller should decide whether it is worth the effort to forecast the real exchange rate indirectly if similar results can be obtained from a (less time-consuming) direct method.
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- Authors: Pretorius, Marinda , Botha, Ilsé
- Date: 2010
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5525 , ISSN 16059786 , http://hdl.handle.net/10210/13931
- Description: The real exchange rate of South Africa can be forecasted using the direct or the indirect methods of forecasting. This article compares the forecasting results of direct and indirect forecasting of the real exchange rate by using two multivariate model. and a multivariate model. The direct models outperformed the indirect models in-sample and the indirect models generally outperformed the direct models out-of-sample. Given the closeness of the forecasting results, the modeller should decide whether it is worth the effort to forecast the real exchange rate indirectly if similar results can be obtained from a (less time-consuming) direct method.
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Forecasting the exchange rate in South Africa : a comparative analysis challenging the random walk model
- Botha, Ilsé, Pretorius, Marinda
- Authors: Botha, Ilsé , Pretorius, Marinda
- Date: 2009
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5526 , ISSN 1993-8233 , http://hdl.handle.net/10210/13933
- Description: Literature shows that exchange rates are largely unpredictable, and that a simple random walk outperforms structural exchange rate models. In order to determine whether fundamentals explain exchange rate behaviour in South Africa, the two approaches to exchange rate forecasting - the technical and fundamental approach - will be compared. Various univariate time series models, including the random walk model, will be compared to various multivariate time series models (using the MAD/mean ratio), combining the two approaches. The determinants of the South African exchange rate are identified, and these determinants are used to specify multivariate time series models for the South African exchange rate. The multivariate models (VARMA) outperformed the univariate models (except for the Random walk model) in the short-run forecasts, one step ahead, while the multivariate models, performed better in the longer-run forecasts. To improve the accuracy of especially the multivariate models, it is recommended that multiple frequencies be used to capture the dynamic behaviour between variables in a Structural VAR framework.
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- Authors: Botha, Ilsé , Pretorius, Marinda
- Date: 2009
- Subjects: Foreign exchange rates - South Africa - Forecasting
- Type: Article
- Identifier: uj:5526 , ISSN 1993-8233 , http://hdl.handle.net/10210/13933
- Description: Literature shows that exchange rates are largely unpredictable, and that a simple random walk outperforms structural exchange rate models. In order to determine whether fundamentals explain exchange rate behaviour in South Africa, the two approaches to exchange rate forecasting - the technical and fundamental approach - will be compared. Various univariate time series models, including the random walk model, will be compared to various multivariate time series models (using the MAD/mean ratio), combining the two approaches. The determinants of the South African exchange rate are identified, and these determinants are used to specify multivariate time series models for the South African exchange rate. The multivariate models (VARMA) outperformed the univariate models (except for the Random walk model) in the short-run forecasts, one step ahead, while the multivariate models, performed better in the longer-run forecasts. To improve the accuracy of especially the multivariate models, it is recommended that multiple frequencies be used to capture the dynamic behaviour between variables in a Structural VAR framework.
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Labour conflict and the persistence of macro underemployment in South Africa
- Schoeman, Christie, Botha, Ilsé, Blaauw, Philip F.
- Authors: Schoeman, Christie , Botha, Ilsé , Blaauw, Philip F.
- Date: 2010
- Subjects: Underemployment - South Africa , Labour conflict - South Africa , Labour market - South Africa
- Type: Article
- Identifier: uj:5536 , http://hdl.handle.net/10210/13948
- Description: Something must be structurally wrong in a labour market when a well developed economy like that of South Africa is not able to absorb and allocate an accumulating surplus of labour over a period of 20 years or longer but has instead moved to the use of more capital-intensive technology. The objective of this paper is to analyse the role labour conflict plays in the persistence of macro underemployment in South Africa. For the analysis two models identified from the literature were used. In these models labour conflict originates from an over-regulated labour market where labour appropriates capital and bad or hostile labour relations. In both models the switch to technology leads to underemployment. It was found that bad labour relations contribute to the persistence of underemployment in South Africa.
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- Authors: Schoeman, Christie , Botha, Ilsé , Blaauw, Philip F.
- Date: 2010
- Subjects: Underemployment - South Africa , Labour conflict - South Africa , Labour market - South Africa
- Type: Article
- Identifier: uj:5536 , http://hdl.handle.net/10210/13948
- Description: Something must be structurally wrong in a labour market when a well developed economy like that of South Africa is not able to absorb and allocate an accumulating surplus of labour over a period of 20 years or longer but has instead moved to the use of more capital-intensive technology. The objective of this paper is to analyse the role labour conflict plays in the persistence of macro underemployment in South Africa. For the analysis two models identified from the literature were used. In these models labour conflict originates from an over-regulated labour market where labour appropriates capital and bad or hostile labour relations. In both models the switch to technology leads to underemployment. It was found that bad labour relations contribute to the persistence of underemployment in South Africa.
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The impact of exchange rate volatility on emerging market exports
- Khosa, Johannes, Botha, Ilsé, Pretorius, Marinda
- Authors: Khosa, Johannes , Botha, Ilsé , Pretorius, Marinda
- Date: 2015
- Subjects: Foreign exchange rates - Volatility
- Type: Article
- Identifier: uj:5529 , ISSN 16841999 , http://hdl.handle.net/10210/13939
- Description: Orientation: High exchange rate volatility has implications for business and policy decisions and exchange rate movements are important in debates around trade and trade policies. Research purpose: The purpose of the research was to determine the impact of exchange rate volatility on exports in emerging markets. Motivation for the study: A lack of clarity in literature regarding this relationship increases the risk of improper planning by export organisations as well as implementing suboptimal economic policies. Research design, approach and method: This research analysed the effect of exchange rate volatility on emerging market exports using a sample of nine emerging countries from 1995 to 2010. Panel data analysis was conducted. Volatility was measured by Generalised Autoregressive Conditional Heteroscedasticity and conventional standard deviation in order to determine if the instrument of volatility used influenced the nature of the relationship between exchange rate volatility and exports. The Pedroni residual cointegration method was used to test for panel cointegration in order to determine if there was a long-run relationship. Main findings: The results showed that exchange rate volatility had a significant negative effect on the performance of exports, regardless of the measure of volatility used. It was also evident that a long-run relationship did exist. Practical/managerial implications: The study concluded that the policy mix that will reduce exchange rate volatility (such as managed exchange rate regimes) and relatively competitive exchange rates were essential for emerging markets in order to sustain their exports performance. Contribution/value-add: This research provided policy makers of emerging market economies with new evidence pertaining to the relationship between exchange rate volatility and the performance of exports. This research contributed to the existing knowledge on the topic and provides a base for future research on related topics.
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- Authors: Khosa, Johannes , Botha, Ilsé , Pretorius, Marinda
- Date: 2015
- Subjects: Foreign exchange rates - Volatility
- Type: Article
- Identifier: uj:5529 , ISSN 16841999 , http://hdl.handle.net/10210/13939
- Description: Orientation: High exchange rate volatility has implications for business and policy decisions and exchange rate movements are important in debates around trade and trade policies. Research purpose: The purpose of the research was to determine the impact of exchange rate volatility on exports in emerging markets. Motivation for the study: A lack of clarity in literature regarding this relationship increases the risk of improper planning by export organisations as well as implementing suboptimal economic policies. Research design, approach and method: This research analysed the effect of exchange rate volatility on emerging market exports using a sample of nine emerging countries from 1995 to 2010. Panel data analysis was conducted. Volatility was measured by Generalised Autoregressive Conditional Heteroscedasticity and conventional standard deviation in order to determine if the instrument of volatility used influenced the nature of the relationship between exchange rate volatility and exports. The Pedroni residual cointegration method was used to test for panel cointegration in order to determine if there was a long-run relationship. Main findings: The results showed that exchange rate volatility had a significant negative effect on the performance of exports, regardless of the measure of volatility used. It was also evident that a long-run relationship did exist. Practical/managerial implications: The study concluded that the policy mix that will reduce exchange rate volatility (such as managed exchange rate regimes) and relatively competitive exchange rates were essential for emerging markets in order to sustain their exports performance. Contribution/value-add: This research provided policy makers of emerging market economies with new evidence pertaining to the relationship between exchange rate volatility and the performance of exports. This research contributed to the existing knowledge on the topic and provides a base for future research on related topics.
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The relationship between the exchange rate and the trade balance in South Africa
- Chiloane, Lebogang, Pretorius, Marinda, Botha, Ilsé
- Authors: Chiloane, Lebogang , Pretorius, Marinda , Botha, Ilsé
- Date: 2014
- Subjects: J-curve , Marshall–Lerner , Vector auto regression , Cointegration , Impulse response function , Foreign exchange rates - South Africa , Trade balance - South Africa , Manufacturing industries - South Africa
- Type: Article
- Identifier: uj:5530 , ISSN 19957076 , http://hdl.handle.net/10210/13941
- Description: The purpose of this paper is to test the existence of the J-curve effect and to show whether the Marshall–Lerner condition holds in the South African manufacturing sector. Using quarterly data from 1995 to 2010, the study uses the vector error correction modelling technique as well as impulse response functions to attain the research objectives. The results show that a long-run equilibrium relationship exists between the manufacturing trade balance and the three explanatory variables: real effective exchange rate, real domestic and foreign income levels. Overall, the results show that a depreciation in the domestic currency results in a deterioration in the manufacturing trade balance in the short run, and that this is followed by an improvement in the long run. The study finds evidence of the existence of the J-curve in the South African manufacturing sector. The long-run dynamics suggest that the Marshall–Lerner condition holds.
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- Authors: Chiloane, Lebogang , Pretorius, Marinda , Botha, Ilsé
- Date: 2014
- Subjects: J-curve , Marshall–Lerner , Vector auto regression , Cointegration , Impulse response function , Foreign exchange rates - South Africa , Trade balance - South Africa , Manufacturing industries - South Africa
- Type: Article
- Identifier: uj:5530 , ISSN 19957076 , http://hdl.handle.net/10210/13941
- Description: The purpose of this paper is to test the existence of the J-curve effect and to show whether the Marshall–Lerner condition holds in the South African manufacturing sector. Using quarterly data from 1995 to 2010, the study uses the vector error correction modelling technique as well as impulse response functions to attain the research objectives. The results show that a long-run equilibrium relationship exists between the manufacturing trade balance and the three explanatory variables: real effective exchange rate, real domestic and foreign income levels. Overall, the results show that a depreciation in the domestic currency results in a deterioration in the manufacturing trade balance in the short run, and that this is followed by an improvement in the long run. The study finds evidence of the existence of the J-curve in the South African manufacturing sector. The long-run dynamics suggest that the Marshall–Lerner condition holds.
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Trading strategies with copulas
- Stander, Yolanda, Marais, Daniël, Botha, Ilsé
- Authors: Stander, Yolanda , Marais, Daniël , Botha, Ilsé
- Date: 2013
- Subjects: Copulas , Pairs-trading , Trading costs
- Type: Article
- Identifier: uj:5535 , http://hdl.handle.net/10210/13947
- Description: A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with bivariate copulas and the fitted copula structures are utilised to identify the trading opportunities. Two trading strategies are considered that take advantage of the relative mispricing between a pair of correlated stocks and involve taking a position on the stocks when they diverge from their historical relationship. The position is then reversed when the two stocks revert to their historical relationship. Only stock-pairs with relatively high correlations are considered. The dependence structures of the chosen stock-pairs very often exhibited both upper- and lower-tail dependence, which implies that copulas with the correct characteristics should be more effective than the more traditional approaches typically applied. To identify trading opportunities, the conditional copula functions are used to derive confidence intervals for the two stocks. It is shown that the number of trading opportunities is highly dependent on the confidence level and it is argued that the chosen confidence level should take the strength of the dependence between the two stocks into account. The back-test results of the pairs-trading strategy are disappointing in that even though the strategy leads to profits in most cases, the profits are largely consumed by the trading costs. The second trading strategy entails using single stock futures and it is shown to have more potential as a statistical arbitrage approach to construct a portfolio.
- Full Text:
- Authors: Stander, Yolanda , Marais, Daniël , Botha, Ilsé
- Date: 2013
- Subjects: Copulas , Pairs-trading , Trading costs
- Type: Article
- Identifier: uj:5535 , http://hdl.handle.net/10210/13947
- Description: A new approach is proposed to identify trading opportunities in the equity market by using the information contained in the bivariate dependence structure of two equities. The relationships between the equity pairs are modelled with bivariate copulas and the fitted copula structures are utilised to identify the trading opportunities. Two trading strategies are considered that take advantage of the relative mispricing between a pair of correlated stocks and involve taking a position on the stocks when they diverge from their historical relationship. The position is then reversed when the two stocks revert to their historical relationship. Only stock-pairs with relatively high correlations are considered. The dependence structures of the chosen stock-pairs very often exhibited both upper- and lower-tail dependence, which implies that copulas with the correct characteristics should be more effective than the more traditional approaches typically applied. To identify trading opportunities, the conditional copula functions are used to derive confidence intervals for the two stocks. It is shown that the number of trading opportunities is highly dependent on the confidence level and it is argued that the chosen confidence level should take the strength of the dependence between the two stocks into account. The back-test results of the pairs-trading strategy are disappointing in that even though the strategy leads to profits in most cases, the profits are largely consumed by the trading costs. The second trading strategy entails using single stock futures and it is shown to have more potential as a statistical arbitrage approach to construct a portfolio.
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