The "global" financial crisis (GFC) emerged during 2008 and it was mainly triggered by the sub-prime mortgage crisis (SMC) in the United States of America. The main aims of this thesis is to conduct an econometric analysis of the financial crisis and household savings in South Africa and also to provide a rationale that will facilitate a policy attention on Domestic Resource Mobilisation (DRM) through household savings. The study uses quarterly time series data for the period 199401 to 201102 obtained on-line from the South African Reserve Bank (SARB). The research is based on the Keynesian saving function, which is a complement of the consumption function. The model will be estimated by using a cointegrating vector autoregressive (CVAR) framework, which allows for endogeneity of the regressors. To check robustness on the cointegration results, the study employs the second empirical technique based on Generalized Impulse Response Function (GIRF) analysis and Variance Decomposition. The regression equation of household savings is expressed as a function of household disposable income, household debt to disposable income, real GOP, interest rate, inflation rate and foreign savings. The variables are tested for the presence of a unit root by the application of the Augmented Dickey-Fuller (AOF), Phillips-Perron (PP) Kwiatkowski, Phillips, Schmidt and Shin (KPSS) tests. The findings of the study are that all variables have unit roots. The cointegration model emphasises the presence of a long run equilibrium relationship between dependent and independent variables. The CVAR reveals the short run of the dynamic household savings model. Taking this into consideration, the study concludes that household debt has a huge influence on the level of household savings. The econometric analysis also revealed that household savings in South Africa actually improved during the period associated with the GFC. It could be postulated that South African households responded to their deteriorating financial situations by reducing their average spending and increasing their savings. Variance decomposition analysis revealed that 'own shocks' constitute the predominant source of variations in household saving therefore household savings can be explained by the disturbances in macroeconomic variables in the study. The study recommends the promotion of household savings and economic growth in order to reduce the dependence of South Africa on foreign savings. DRM is therefore enhanced by a higher level of household savings, which can facilitate higher levels of investment and economic growth. / Thesis (PhD (Economics) North-West University, Mafikeng Campus, 2012

This study discusses the monetary policy transmission mechanism in the different channels. The analysis is conducted using generalized impulse response functions derived from a factor-augmented vector error correction (FAVECM) model. The FAVECM methodology as developed by Lee (2009) extends the factoraugmented vector autoregression (FAVAR) model to analyze long-run and shortrun dynamics of non-stationary variables. This recenly derived FAVECM model combines the advantages of factor model and the VECM model. The estimations are conducted using 174 macroeconomic time series in monthly frequency for the period January 2000 to September 2009. Results indicate that interbank call loan rate, deposit rate and prime lending rate are conintegrated, which provides sufficient evidence of the existence of the credit channel in monetary transmission system. Other GIRF results are generally consistent of the expected monetary policy effectiveness.

This study revists Purchasing Power Parity (PPP) and discusses the monetary policy transmission mechanism in exchange rate channels. The analysis is conducted using generalized impulse response functions derived from a Factor- Augmented Vector Error Correction (FAVECM) model. The FAVECM methodology as developed by Lee (2009) extends the Factor- Augmented Vector Autoregression (FAVAR) model to analyze long-run and shortrun dynamics of non-stationary variables. This recently derived FAVECM model combines the advantages of factor model and the VECM model. The estimations are conducted using 157 macroeconomic time series in monthly frequency for the period January 2000 to September 2009. Results indicate that PPP exists and expansionary devaluation effect in Taiwan. Other GIRF results are generally consistent of the expected exchange rate effectiveness.

The 2007-2008 US subprime mortgage crisis evolved into a financial crisis that negatively affected many economies in the world and therefore it was widely referred to as the global financial crisis. Since the beginning of this financial crisis of 2008-2009, South Africa experienced a significant increase in its household debt to income ratio. In the main, the aim of this dissertation is to investigate the prominent factors contributing to the rise in the level of household debt in South Africa. Also, we study the response of household debt to various shocks originating from the aforementioned crisis. Additionally, in the context of our timeline (1985 Q1-2012 Q1) we will extrapolate possible graphical trends in the rise and fall of household indebtedness in South Africa associated with various crises. Working from past research papers and a theoretical framework developed by Franco Modigliani and Milton Friedman, seven macroeconomic variables will be considered to examine the rise of household borrowing to income namely; the real house price index, consumer price index. real income, real prime rate, real household consumption expenditure, real gross domestic product and real household savings. Both a long-run cointegration analysis and a short-run error correction model will be used to evaluate the relationship between household debt and the chosen variables by estimating a Vector Error Correction Model. Furthermore, the Variance Decomposition and the Generalized Impulse Response Function will be utilized to assess the impact of household debt to various shocks emanating from the 2008-2009 financial crisis. The different models and tests conducted in this research will be executed using the statistical software package EVIEWS 7. Based on the results, household debt was seen to have been fairly affected by the 2008-2009 financial crisis. The cointegration analysis maintains that in the long run, household borrowing is positively and significantly determined by consumer price index and real household consumption. In addition, it confirms that household borrowing is negatively affected by real household income and real GOP. The rest of the variables were found insignificant. Nevertheless, the short run error correction model reveals that about 3.6% of the disequilibrium will be corrected each quarter for the equilibrium state to be restored. Also, the Variance Decomposition results confirmed that the South African household debt is mostly affected by shocks from real house price index, real household income, real household consumption and real household savings, respectively. Furthermore, the Generalized Impulse Response Function results established the significant positive response of household debt to a shock from real house price index and real household consumption. The response of debt to shocks from consumer price index, real household savings and real income is negative and this outcome is confirmed by the theory. However, the response of debt shows fluctuating behaviours to shocks from LRIN, LRPR and LRGDP over the estimated period. In conclusion, our econometric investigation highlighted the main causes of the high levels of household debt in South Africa both in the short and long run. The Generalized Impulse Response Functions confirm that shocks like the occurrence of the 2007-2008 financial crisis will have a significant impact on real house price index, consumer price index, real household consumption and real household savings. The Engle granger results show that there exist no significant relationship between household debt and unemployment in South Africa over the period 1980 to 2010. However, we propose that this result may have been significant if quarterly unemployment data was available and included in the main data set. Finally, based on the stability, validity and reliability of our model, we recommend its use to facilitate policy analysis and decision making regarding household debt levels in South Africa. / Thesis (M.Com.( Economics) North-West University, Mafikeng Campus, 2012

Doctor of Philosophy / Department of Economics / Wayne Nafziger / This dissertation constructs three empirical essays. The first essay illustrates the causality on the relationship between output (GDP) growth and exports. By using the Modified Wald (MWald) test we observe unidirectional causality from exports to GDP. More specifically, for the robustness we use a Vector Error Correction Model (VECM) model and the Generalized Impulse Response Function Analysis (GIRA). The VECM and the GIRA yield bidirectional causality between exports and GDP, which weakly supports the unidirectional result of the to MWald test. Meanwhile, we confirm that there is structure break by using the structural break test. These results are plausible and consistent with the expectations of our study for the Export Led Growth Hypothesis (ELGH). However, compared with previous studies on the ELGH for Korea, our results are different. Other studies show a bidirectional causality relationship but this study only has unidirectional causality. These differences may be caused from different observation data, various variables, and use of different econometric methodologies. Also, model selection and omitting variables can also significantly change the results of causality testing. The second essay investigates a degree of competition between Korea's and China's exports in the U.S. market by using the substitute elasticity on a simple demand model. The market share of Korean exports has been decreasing while that of China's has been increasing. The results of this study are as follows. First, we find that Korea has a dominant market share of only goods group code 27 in commodity groups over that of China, otherwise having China's dominant market shares over those of Korea for other export sections by using historical trade data. Second, most estimates of substitute elasticity between both countries' exports in the U.S. market are small (inelastic). However, 61 (apparel articles and accessories, knit or crochet), 62 (apparel articles and accessories, not knit etc) and 85 (electric machinery etc, sound equipments, TV equipment, parts) commodity groups' substitute elasticities are large (elastic) and are competitive in the U.S. market compared with those of China. A small value of the elasticity of substitution may be due to an identification problem for a simple standard model as well as measurement errors in prices as a unit value in this study. So, in order to avoid problems such as these, we may need to use appropriate instrumental or proxy variables in the simple standard model, which highly correlate with the independent (unit price) variables and are uncorrelated with measurement error terms. In practice, it is not easy to find good instrumental variables. The final essay evaluates the roles of price and income as important factors that affect Korea's exports by using the most recent monthly data. By using the Autoregressive Distributed Lag (ARDL) bounds testing approach we find the long-run relationship of variables and estimate the long-run price and income elasticities. However, the estimates of these long-run elasticities are statistically insignificant. This may be due to some misspecifications or measurement errors in our model. Meanwhile, due to the existence of the long-run relationship between variables, we construct the Error Correction Model (ECM) in order to observe the short-run dynamics of the elasticities. Specifically, we add a dummy variable into our export demand model to achieve more efficient estimations since the dummy variable reflects a shock in Korea's export; Korea's economic crisis in 1997. In contrast to the long-run elasticity, we find that the short-run elasticities' estimates are more statistically significant. When we use the structure break test to check the structural stability of Korea's export demand, we find that there is no structural break point of 1997. Therefore, a shock of Korea's economic crisis in 1997 might not significantly affect Korea's export demand in a given sample. However, the Information Technology (IT) bubble of the world economy in 2001 and the entry of Korea into the OECD had triggered an increase in Korea's export demand due to existing structural break points of both events. In addition, we find that income elasticities are larger than price elasticities in the short run. This implies that income has more of an impact than that of price for the export demand model in the short run. This also implies that the change of Korea's exports in the short run is more sensitive to changes in foreign income (industrial production) compared with that of price (exchange rate). An interesting result, thus, is that Korea's exports in the short run may have higher export performance on income than that of price (exchange rate). This might be a consequence of the dependence of an increase in foreign income in recent years. In recent years, developing countries have greatly increased their economic growth compared with that of developed countries and Korea's exports have increased into these developing countries. Thus, we confirm that an increase in Korea's exports is mainly affected by income compared with price, specifically in the short run by using recent data.