Faculty of Commerce, Administration and Law

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Browsing Faculty of Commerce, Administration and Law by Subject "BRICS"

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    An exposition of BRICS political and economic governance: towards a new and balanced global world order
    (University of Zululand, 2020) Khuzwayo, Noxolo Nomfundo
    The concept of BRIC was first introduced by Jim O’Neill in 2001 to describe a group of economically emerging countries (the Federative Republic of Brazil {Brazil}, Russian Federation {Russia}, Republic of India {India}, and People’s Republic of China {China}) who, on a purchasing power parity (commonly known as PPP) basis, contributed an aggregate of 23.3% to the world’s GDP in the year 2000. The Republic of South Africa formally joined this group in 2010 and together they represent 43% of the world’s population with a combined nominal GDP of US $13, 7 trillion and control 17% of the world trade. It is estimated that by 2027 BRICs (excluding South Africa) countries will overtake the G7 countries. The BRICS are in a similar stage of economic development. This group represents a huge economic power shift from the developed G7 (French Republic, the Federal Republic of Germany, the Italian Republic, Japan, the United Kingdom of Great Britain and Northern Ireland, the United States of America and Canada). Therefore it is safe to deduce that these countries’ economic wellbeing is of paramount importance to the economic development of the world. BRICS is not a political alliance, rather it is a group of states that are still developing and are characterised by fast growing economies and these nations have significant influence on regional and global affairs. However, while they are still overcoming poverty, inequality and other challenges they share a common vision that aims to address the similar socio-economic characteristics that compound these nations. Each member of BRICS has its own political and economic characteristics e.g. Brazil has massive amounts of oil, along with large suppliers of agricultural products; Russia has great repositories of oil, along with coal and natural gas; India has iron ore, bauxite and copper ore and is one of the major producers of iron in the world; China has coal, iron ore, petroleum, natural gas, mercury, rare earth elements, uranium and the world’s largest potential for hydro power and lastly South Africa is the largest energy producer and consumers on the African continent it has diamonds and gold, the country also has reserves of iron ore, platinum, manganese, chromium, copper, uranium, silver, beryllium and titanium. Therefore, is it clear that the combination of these countries economically is very significant and they play an 14 important role in the international system, with regards to trade and international relations. Therefore, the study was motivated by these findings, hence it seeks to understand the formulation of BRICS and how this might contribute to a change in the global world order.
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    Financial contagion in emerging markets evidence from BRICS countries
    (University of Zululand, 2019) Niyitegeka, Olivier
    The present study examines the pure form of contagions in the BRICS countries, namely Brazil, Russia, India, China, and South Africa. The pure form of contagion refers to the propagations of shocks due to reasons that are not related macroeconomic fundamentals, and are solely the result of irrational phenomena, such as panics, herd behaviour, loss of confidence and risk aversion. The choice of BRICS was motivated by the fact that these emerging countries have stronger partnerships through the BRICS association. Additionally, these countries come from various continents across the world. This allowed the study to have a worldwide overview of how contagions are transmitted, not only in one region but across regions. The main objective of this study was to examine co-movement and volatility spillover in BRICS countries from ‘source’ markets of the U.S. and Eurozone region. Specifically, the study sought to accomplish the following objectives: (i) To examine the salient characteristics of equity markets in BRICS countries, (ii) To investigate the nature of stock market returns’ volatility for BRICS countries during periods of financial turmoil, (iii)To examine the presence of time-varying conditional correlations in BRICS’ equity market returns, in the wake of the financial crises that took place in the U.S. and Eurozone countries, and (iv) To investigate the presence of time-frequency correlations in BRICS stock markets, following the financial crises that took place in the U.S. and Eurozone countries. The following four econometric models were formulated and utilised by the study: (i) GARCH (1, 1) and its extensions; (ii) the diagonal VECH GARCH (1, 1); (iii) the Dynamic Conditional Correlation GARCH; (iv) and Wavelet analysis. The study found that stock markets within BRICS countries are heterogeneous as they differ in their structural characteristics, economic policies, and geopolitical importance. The Chinese and Russian markets are still in the maturing process as they only reopened recently after decades of communist regimes that prohibited security markets. The Brazilian, Russian and South African stock markets are dominated by natural resource-based stocks, and they are well known commodity exporters. Among the BRICS stock markets, China’s market has experienced the most rapid growth in the past 20 years. The results of Univariate GARCH modelling revealed the persistence of volatility in the BRICS returns, with China (SSE) having the highest volatility persistence, followed by India (SENSEX) and Russia (RTSI). Using GARCH (1,1) variants, the study also found evidence of leverage effect in all BRICS stock markets except China. Bivariate GARCH models were used to examine the dynamic cross-correlation between individual BRICS stock markets as target markets and the U.S. and Eurozone as ground zero (source) markets. The study showed that the cross-conditional volatility coefficient is high in magnitude during periods of financial upheaval compared to a tranquil period, hence the conclusion that there was financial contagion in BRICS stock markets (with the exception of the Chinese stock market) during the U.S. sub-prime and the Eurozone sovereign debt crises. The wavelet cross-correlations analysis showed evidence of positive cross-correlation between the U.S. and individual BRICS stock markets, and the cross-correlation was identified in both short and coarse scales, with the U.S. leading BRICS countries. The cross-correlation between the U.S. and Chinese equity market could not be established. Regarding the Eurozone sovereign debt crisis, the wavelet cross-correlation analysis shows evidence of co-movement and volatility spillover in the short scales, with the DAX leading the BRICS market indices. Evidence of financial contagion emanating from Eurozone stock markets could only be identified in the South African and Russian stock markets. For the Brazilian, Indian, and Chinese markets, no correlation was identified in the short scale period, hence the conclusion that no financial contagion took place in these three stock markets following the Eurozone sovereign debt crisis. The study recommends that since volatility spillover between individual BRICS equity markets and the U.S. market is unidirectional policymakers, investors and regulatory authorities should focus more on monitoring the volatility of the U.S. equity market, as efforts by authorities in BRICS countries to stabilise BRICS stock markets is futile as shocks are exogenous. The current study also recommends that regulatory authorities should come up with initiatives that enable investors to reduce significant risk exposure by formulating sound risk management policies and macroprudential regulations. Given the fact that the current study could not identify financial contagion in Brazilian, Chinese and Indian stock markets emanating from Eurozone countries, the study recommends that policymakers policy makers need to pay due attention to idiosyncratic shock channels in responding to volatility spillover.
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