Thesis (Ph.D. (Statistics)) -- University of Limpopo, 2017 / Refer to docutment

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It has not been previously argued whether development finance can or should be regarded as a distinguishable academic discipline in its own right. The main objective of this study was to create an in-depth understanding of the current perceptions and misconceptions of development finance within the South African financial sector, which have not been formally captured or analysed previously. The research is important in determining the magnitude of contemporary interest in, and the emphasis of, development finance as a means of developing society. Furthermore, public perception influences the funding of future development finance research, the emerging theoretical framework and disciplinarity, access to education and training in the subject area, the level of student participation and enrolment in development finance courses and qualifications, as well as the supply of skilled practitioners. To accomplish the research objectives, an extensive literature review was conducted so as to provide a theoretical framework for the empirical study. Subsequently, self-administrable questionnaires were distributed to a non-probabilistic convenience sample of 319 individuals who have decision-making experience within the South African financial sector. Thirty-one respondents completed the questionnaire and the results were examined by means of non-probabilistic frequency distribution and qualitative analysis, where appropriate. Pervasive disagreement was found to exist among the respondents regarding a number of key issues, including the definition and characteristics of development finance, in addition to its pedagogy, professionalisation, and disciplinarity. A substantial majority of respondents agreed that there is a shortage of development finance experts in South Africa and that local universities should begin to offer students an undergraduate degree majoring in development finance specifically. It is recommended that in order for future development finance research, pedagogy, and practice to be more meaningful, greater conceptual clarity and more consistent usage of terminology and subject boundaries should be employed by stakeholders.

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Stock return volatility has been shown to occasionally exhibit discrete structural shifts. These shifts are particularly evident in the transition from ‘normal’ to crisis periods, and tend to be more pronounced in developing markets. This study aims to establish whether accounting for structural changes in the conditional variance process, through the use of Markov-switching models, improves estimates and forecasts of stock return volatility over those of the more conventional single-state (G)ARCH models, within and across selected African markets for the period 2002-2012. In the univariate portion of the study, the performances of various Markov-switching models are tested against a single-state benchmark model through the use of in-sample goodness-of-fit and predictive ability measures. In the multivariate context, the single-state and Markov-switching models are comparatively assessed according to their usefulness in constructing optimal stock portfolios. It is found that, even after accounting for structural breaks in the conditional variance process, conventional GARCH effects remain important to capturing the heteroscedasticity evident in the data. However, those univariate models which include a GARCH term are shown to perform comparatively poorly when used for forecasting purposes. Additionally, in the multivariate study, the use of Markov-switching variance-covariance estimates improves risk-adjusted portfolio returns when compared to portfolios that are constructed using the more conventional single-state models. While there is evidence that the use of some Markov-switching models can result in better forecasts and higher risk-adjusted returns than those models which include GARCH effects, the inability of the simpler Markov-switching models to fully capture the heteroscedasticity in the data remains problematic.

South Africa is endowed with a well-developed and regulated financial system which compares favourably with those of other developed economies. Therefore the financial sector is intended to play a significant role in supporting the real economy, by enhancing trade and stimulating economic growth and development. Despite the existence of a stable, developed and well-regulated financial sector, the South African economy has experienced current account deficits for the past 10 years and economic growth rates have mostly trailed behind the targets prescribed by the socio-economic programs formulated and implemented since 1994. To solve the trade – financial development – economic growth nexus problem, most studies have focused on other countries while research studies on South Africa did not explicitly investigate the trade – financial development – economic growth triangle, the linkage which failed to yield the desired outcome for South Africa’s post 1994 era.Therefore, this study employs Cointegration Vector Autoregressive (CVAR) methodology to investigate the relationship between trade, financial development and economic growth in South Africa. The unit root test revealed that the variables considered in the study are I(1) variables and the Johansen cointegration test justified the existence of a long run relationship among the variables. The empirical findings indicate that imports and financial development are positively related to exports whilst economic growth is negatively related to exports. The VAR Ganger causality test has shown that there is a uni-directional causality running from financial development to economic growth, exports and imports and that imports Granger cause exports. The results of this study form the basis for further investigation into the non-performance of exports and economic growth in the nexus. The research study opens up new policy insights by suggesting that financial policy can be used to be more supportive to the production of intermediate and finished products destined for both international and domestic markets.

Foreign direct investment amongst other mechanisms provides capital inflow meant to stimulate economic growth. Apart from promoting economic growth, FDI can also lead to increase in employment, technology, technical knowhow and managerial skills. South Africa has implemented various policy initiatives in attempts to attract foreign investment. This study investigates on the effect of foreign direct investment on economic growth, with particular reference to the South African economy. The period of study is from 1980 to 2010. The study begins by reviewing literature on economic growth and foreign direct investment. South Africa’s macroeconomic background is examined to determine the trends in FDI inflows and economic growth. An empirical model linking theoretical and empirical literature on the effect of FDI on economic growth is estimated using the Johansen cointegration and VECM framework. Variables specified in the methodology include real gross domestic product (RGDP), foreign direct investment (FDI), domestic investment (INVE), real exchange rate (REXCH) and foreign marketable debt (DEBT). The long run results showed that FDI, REXCH and DEBT have a negative impact on growth. INVE has a positive impact on growth. Short run results indicated that there is no strong pressure on RGDP to restore long-run equilibrium whenever there is a disturbance. The short run lag of FDI was found to exert a positive impact on growth. The impulse response and variance decomposition analysis complemented the long and short-run findings. Shocks on REXCH, and DEBT generated a negative response on RGDP. The shocks were not significantly different from zero and were transitory. Results from the variance decomposition analysis revealed that the fundamentals explain some, but not all, of the variations of RGDP. For the fifth year forecast error variance RGDP explains the largest component of the variation followed by INVE, REXCH, FDI and DEBT. After a period of ten years, the influence of RGDP and INVE declines, whereas REXCH, FDI and DEBT increase. Conclusions and policy recommendations were made using these results.