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    Exploring the Role of Fiscal Policy and Sovereign Debt Shocks on Economic Growth among Southern African Developing Communities
    (University of Zululand, 2021) Makhoba, Bongumusa Prince
    Fiscal policy remains a key macroeconomic stabilisation mechanism at the disposal of governments and fiscal policymakers to influence economic activities consistent with balanced and sustainable economic growth. A thorough understanding of the role fiscal policy remains extremely paramount for fiscal authorities to consistently formulate prudent fiscal stimulus packages that enhances sustainable economic expansion. This thesis critically examines the role of fiscal policy and sovereign debt shocks on economic growth in the Southern African Developing Communities (SADC). Over the years, fiscal policy and austerity measures have triggered a deterioration in the fiscal position of these member countries primarily due to the relatively high budget deficits, inducing even further sovereign debt risk in long-term economic prosperity. The phenomenon of fiscal policy has gained immense scholarly popularity among both researchers and policymakers, stimulating intensive debate in the body of literature as to whether fiscal policy has been able stabilise macroeconomic fluctuations across different economies characterised by different phases of economic growth and development. The study starts by giving a thorough background and introduction in Chapter 1. Chapter 2 discusses a detailed review of existing theoretical frameworks on the role of fiscal policy and sovereign debt on economic growth. Chapter 3 analyses the role of fiscal policy and sovereign debt shocks on economic growth in the SADC region. In this chapter, a Panel Vector Autoregressive (PVAR) model was estimated using annual data for 13 SADC countries ranging from 2000-2018. The empirical results revealed that government expenditure, employment and public debt has a significant positive influence on economic growth while gross fixed capital formation exerts a negative effect on growth. The findings of the study are consistent with the Keynesian school of thought, which strongly argues that governments use countercyclical expansionary fiscal policy as a credible tool to spur economic activities and stabilise macroeconomic fluctuations during different phases of the business cycle. Chapter 4 estimates a Panel Smooth Transition Regression (PSTR) model to examine a nonlinear effect of public debt on economic growth among SADC members for the period viii 2000-2018. The findings show a significant asymmetric relationship between public debt and economic growth in the SADC region. The results further indicate a debt threshold of 60% at which public debt deters economic growth in SADC region. The empirical results of a linear and nonlinear effect of public debt on growth are consistent with several prior empirical studies conducted across different economies using different methodologies. In line with the Keynesian approach, the results further suggest that fiscal policy plays a central role in augmenting economic activities both in the low-debt regime and high-debt regime, indicating that, indeed, a positive shock in government spending positively influence economic growth in SADC economies, reinforcing the findings of the previous chapter. Furthermore, the results reveal a significant positive impact of public debt on economic growth during the low regime when the debt level is below the threshold of 60%. Moreover, there was a significant negative effect of debt on economic growth during the high-debt regime as debt level reach the threshold of 60%. This result indicates that there is an inverted U-Shape relationship between public debt and economic growth among SADC economies. Chapter 5 empirically interrogates the asymmetric relationships between public debt and economic growth among selected emerging and frontier SADC economies over the period 2000-2018. In this chapter, a Smooth Transition Regression (STAR) and Nonlinear Autoregressive Redistributed Lag (NARDL) is estimated to analyse the asymmetric effect of public debt on economic growth among selected SADC economies. The results revealed mixed findings on nonlinearity among emerging and frontier SADC members. The findings indicate a concave relationship between debt and economic growth in South Africa, while Botswana, Namibia, Zambia and Zimbabwe showed a U-shape relationship between debt and economic growth. This implies that public debt exerts a significant positive influence on economic growth during low-debt regime while there is a negative effect of debt on economic growth during a high-debt regime in South Africa. Conversely, Botswana, Namibia, Zambia and Zimbabwe show a negative effect of debt during the low-debt regime and a positive influence during a high-debt regime. Malawi, however, showed a positive impact of debt on growth during both low-debt and high-debt regimes.
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    Female labour force participation and economic growth in South Africa
    (University of Zululand, 2019) Mabuyakhulu, Sibongayena Sithembile
    Since the mid-90s female work compel investment has seen a stark increment (by 38%) boosting the general business levels. However, by global norms female labour force participation stays low and it is lower than for men averaging to a gap. Women’s work remains characterised by domestic and cultural divisions. This study establishes the long-run relationship between female labour force participation and economic growth and unemployment in South Africa by using time-series data collected from various data source for the period of 1980 to 2015 (yearly) and 2008 to 2016 (quarterly). Empirical studies form both developed and developing countries indicate different results and also indicating a U-shape relationship between female labour force participation and economic growth. This study adopted the Cointegration Vector Autoregressive and Vector Error Correction Model (multivariate equations) together with cointegration equations (FM-Ordinary Least Squares, Canonical Cointegrating Regression and Dynamic Ordinary Least Squares) to establish the long-run and shortrun relationships and the effect of economic growth and unemployment on the participation of women in the labour force. The estimate of yearly data shows that unemployment is positive and significantly influences the participation of women in the labour force in the long run. Economic growth exhibits the n-shape relationship with female labour force participation in the long run, hence, it indicates the opposite of what other researchers have found. The Vector Error Correction Model indicate insignificant effect of economic growth and unemployment on FLFP.
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    Inflation and unemployment in the South African democratic era: is there any trade-off
    (University of Zululand, 2021) Jeza, Mbalenhle Precious
    Achieving and maintaining price stability as well as the creation of sustainable employment are two of the most emphasized objectives of the South Africa Reserve Bank. South Africa has consistently suffered double-digit unemployment rates and unstable price levels, with a resultant stifling of economic growth rates. As a result of these continuous economic issues, South Africa’s central bank policymakers have come under scrutiny regarding the adopted policy framework, which seems to be failing the economy with the growing unemployment rate and overall price level increments to prevail and triggering worsened standards of living for citizens. In an attempt to close the gap in the existing literature, this study examines the inflation unemployment in democratic South Africa. This is achieved through examining the applicability of both the Phillips Curve and the New Keynesian Phillips Curve to determine whether these macroeconomic theories can be adopted in the fight against these economic issues facing South Africa. The Autoregressive Distributed Lag modelling technique is adopted by this study, where quarterly data spanning from 1994Q1 to 2019Q4 is analysed. Findings dismiss the existence of both the Phillips Curve and the New Keynesian Phillips Curve in South Africa. A recommendation to policymakers would be to focus less on inflation targeting, as it was discovered to have a small influence over the unemployment rate. Rather, given the finding that GDP was positively related to inflation, allowing inflation to move more freely could enable a stable economic growth that has the potential of reducing unemployment. This study further recommends that the SARB bank should for targeting output instead.
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    The health-economic growth nexus: a lower and middle-income Sub-Saharan economies comparison
    (University of Zululand, 2020) Mpungose, Lwayiphi Ottet
    The relationship between health and economic growth has been examined extensively during the past 30 years in developed and European countries. However, there are few studies that have investigated this relationship in Sub-Saharan Africa countries. The study investigated the relationship between health and economic growth by comparing low and middle-income Sub-Saharan Africa countries from 2000-2016. The study employed data from World Bank Indicators (WDI) in the World Bank database. This study is unique amongst existing studies in two respects. Firstly, it investigates the relationship between health and economic growth by comparing lower-income with middle-income Sub-Saharan Africa countries, since these countries have not received enough scholarly attention. Secondly, the study introduces Principal Component Analysis (PCA) with an aim to create a health index, since no such measure variable exists for health. The study employed two Panel Vector Autoregressive models (PVAR) to investigate the relationship between health and economic growth. A Panel Vector Autoregressive model is an appropriate model for large panel data sets (Munyengwa, 2012). The results of the study support the Endogenous Growth Theory, which emphasises the crucial role that is played by health as a determinant or engine of economic growth through human capital effect. An improvement in health by 10% raises the economic growth rate by 2% in the short run. The study found a strong positive, statistically significant influence of health on economic growth in lower-income Sub-Saharan Africa countries. The study also found a positive, but statically insignificant impact of health on economic growth in middleincome Sub-Saharan Africa countries. These findings are very important to policymakers in the respective countries.
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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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