This study exammes the impact of macroeconomic and financial variables on the performance of the housing property market in South Africa using monthly data for the period January 1996 to June 2008. Orthogonalised and non-orthogonalised house price returns and real estate returns are utilised as proxies for the housing property market in separate models. Three main issues were empirically analysed in relation to the linkage between selected variables and the housing property market. The first aspect examined the relationship between selected macroeconomic and financial factors and property returns. Secondly, the study examined the influence that a unit shock to each variable has on property returns over a period of time. The third aspect focused on determining the proportion of property returns variation that results from changes in the macroeconomic and financial variables. VAR modelling was thus adopted to empirically analyse these three aspects. The results reveal that house price returns are influenced by most of the macroeconomic and financial variables used in this study. Specifically, the real effective exchange rate, interest rate spread and manufacturing production positively impact on house price returns while the domestic interest rate, the dividend yield and expected inflation have a negative effect. Furthermore, manufacturing production has a lagged effect on house price returns while the real effective exchange rate and domestic interest rate have a contemporaneous effect. Real estate returns are not influenced by most of the variables except for the domestic interest rate and dividend yield which have a negative effect.

The fact that South Africa has a floating exchange rate policy as well as an open trade policy leaves the country’s import, producer and consumer prices susceptible to the effects of exchange rate movements. Given the central role that inflation targeting occupies in South Africa’s monetary policy, it becomes necessary to determine the nature of influence of exchange rate changes on domestic prices. To this end, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to import, producer and consumer prices in South Africa. Furthermore, it explores whether the direction and size of changes in the exchange rate have different pass-through effects on import prices, that is, whether the exchange rate pass-through is symmetric or asymmetric. The paper uses monthly data covering the period January 1980 to December 2005. In investigating ERPT, two main stages are identified. The initial stage is the transmission of fluctuations in the exchange rate to import prices, while the second-stage entails the pass-through of changes in import prices to producer and consumer prices. The first stage is estimated using the Johansen (1991) and (1995) cointegration techniques and a vector error correction model (VECM). The second stage pass-through is determined by estimating impulse response and variance decomposition functions, as well as conducting block exogeneity Wald tests. The study follows Wickremasinghe and Silvapulle’s (2004) approach in estimating pass-through asymmetry with respect to appreciations and depreciations. In addition, the thesis adapts the analytical framework of Wickremasinghe and Silvapulle (2004) to investigate the pass-through of large and small changes in the exchange rate to import prices. The results suggest that ERPT in South Africa is incomplete but relatively high. Furthermore, ERPT is found to be higher in periods of rand depreciation than appreciation which supports the binding quantity constraint theory. There is also some evidence that pass-through is higher in periods of small changes than large changes in the exchange rate, which supports the menu cost theory when invoices are denominated in the exporters’ currency.

This study seeks to investigate the trends and interactions of market volatility as a source of instability in the South African financial markets. Financial instability can be manifested in the form of banking and currency crisis, institutional failures and extreme asset price volatility. This study, however, focuses on a single aspect of financial instability - asset price volatility. Asset price volatility reflects changes in market expectations as investors react to such changes, and thus on its own is not necessarily a source of instability. However, volatility spillovers can propagate volatility shocks across the market, increasing the risk of widespread instability. Using a combination of graphical and trend analysis as well as more formal estimation techniques, the study examined volatility in the stock, money and foreign exchange markets. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, TARCH and EGARCH. An analysis of volatility interactions and the transmission of volatility shocks across the market is crucial to understanding financial instability. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated. This framework allowed us to examine the propagation of shocks across the markets. Volatility in the financial markets was found to be highly persistent and in the case of exchange rates, volatility was also characterised by an increasing trend. Significant linkages between the financial markets were found. The links also extended to the volatility relationship as evidenced by significant volatility spillovers across the markets. While volatility spillovers from the money market were found in the stock market and the foreign exchange market, no volatility spillovers from these markets were found in the money market. Thus the money market was identified as the major source of volatility spillovers and shocks in the financial markets. These results highlighted the role of monetary policy in the financial system, specifically the need to make monetary policy stable and predictable to ensure that interest rate shocks are not an additional source of instability. / KMBT_363 / Adobe Acrobat 9.54 Paper Capture Plug-in

The argument with regards to whether macro-economic fundamentals determine stock market behaviour is very important because of the roles it plays in an economy. Such roles include: pooling and trading of risks, mobilization of savings, provision of liquidity and allocation of capital. However, the stock market will only perform such roles effectively if the macro-economic environment is conducive. This study examined the behaviour of the All Share Index (ALSI) and market capitalization on the Johannesburg Stock Exchange in response to changes in the domestic and international macro-economic fundamentals such as the consumer price index, rand-dollar real exchange rates, domestic GDP, yield on South African government bonds, yield on United States government bonds and United States GDP. The study used cointegration and error correction techniques proposed by Johansen and Juselius (1990) to test for long run relationship. Two separate models were estimated and results obtained show that the two proxies for the stock market behaviour (All share Index and market capitalization) are true endogenous variables, but react differently to economic fundamentals. The consumer price index has a significant negative impact on the JSE share price index while market capitalization is determined predominantly by the yield on South African government bonds. The exchange rate seems to have had little or no influence on the share price index, but becomes negative and significant in the case of market capitalization. The yield on United States government bonds also produced a strong influence on both the share price index and market capitalization. While it has a negative significant impact on share prices, it produced a positive significant impact on market capitalization. In order to ascertain whether the South African interest rate or the United States interest rate is more important in explaining the share price and market capitalization, each of the variables were estimated in the model separately, the result obtained reveals that the United States interest rate is more important than the domestic interest rate in explaining the share price and market capitalization on the JSE. This implies that investors need to observe the USA interest rate before investing in South African equities. A comparison of the responses of share price index and market capitalization to impulses from the macro-economic variables tested reveals that both proxies elicit a positive response from aggregate output. The share price index responds more significantly to impulses from output growth than the market capitalization, meaning that, as aggregate production increases, the share price index tends to respond positively and quickly. The exchange rate produced mixed result from the two proxies, while it produced a positive response from the market capitalization; an initial positive response was noted in the share price index that immediately turned negative. Another glaring contrast was identified in the response of both proxies to impulses from the United States interest rate. The share price index responded positively while the market capitalization produced a negative response. This finding reveals that the two proxies actually respond differently to macro-economic variables. The variance decomposition of both stock prices and market capitalization reveals that the yield on United States government bonds has a more significant absorption potential than the South African government bonds. However, the absorption process is slower in the case of the market capitalization. The exchange rate has a greater impact on the market capitalization than stock prices. The overall assessment shows that share prices respond faster than market capitalization to macro-economic fundamentals. The study also shows that the increased openness of the South African economy by way of relaxation of the exchange control on capital account transaction has allowed the USA market to play a crucial role in equity prices in South Africa. Three main policy recommendations results from the study. Firstly, if inflation is well monitored, then the local equity market is bound to perform strongly resulting in strong shares earning growth. Secondly, the exchange rate should be made to be less volatile so that long term investment plans across borders can be further enhanced. Thirdly, financial analyst and investors in South Africa need to analyse macro-economic developments in the United States before investing in equities in South Africa.

(Ph. D. (Agricultural Economics)) -- University of Limpopo, 2021 / The issues regarding the determinants of agricultural production and food supply are currently of great interest in developing countries. This, in turn, has led to the undertaking of this study focusing on the effectiveness of incentives that can be offered within the agricultural sector to boost production. The study aims to model the supply response of key agricultural commodities to price incentives, price risk and non-price incentives. Special focus is given to four major grain crops, namely; maize, wheat, sorghum and barley, which are of strategic interest to South Africa. The emphasis of the study is on two significant aspects of agricultural supply response: First, an attempt is made to determine the level of price risk among the selected grain crops using two distinct price risk measures. Second, the Autoregressive Distributed Lag-Error Correction Model (ARDL-ECM) approach to cointegration is used to estimate the responsiveness of grain producers to price risk, price incentives and non-price incentives. Annual historical time series data of 49 observations for the period 1970 to 2018 is used in the analysis. Data is tested for stationarity using the Augmented Dickey-Fuller test and the Dickey-Fuller Generalised Least Square (DF-GLS) detrending test. The empirical results reveal that grain supply in South Africa is reasonably responsive to price incentives. However, the degree of responsiveness is low and varies among different crops. Depending on the crop, the results show that own price supply elasticities range from about 0.24 to 0.75. Supply elasticities for nonprice factors are much higher, indicating that non-price incentives (i.e. rainfall, fertiliser, technology) are better production drivers than price incentives in South Africa. Thus, instead of regarding price mechanisms as being the only tools to promote agricultural production, it is concluded that further expansion of irrigation facilities and encouraging the adoption of drought-resistant varieties will stimulate grain production. The results underscore the relevance of price risk in determining production output and show that greater price risk leads to reduced production levels, particularly for maize and barley. In light of such evidence, any policy initiatives undertaken to stabilise the grain industry should look into proposing packages (i.e., forward contracts, futures contracts, contract farming) that reduce the negative impacts of price volatility in grain commodity markets

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

Thesis (MComm (Statistics and Actuarial Science))--University of Stellenbosch, 2006. / An overview of modern and historical interest rate model theory is given with the specific aim of derivative pricing. A variety of stochastic interest rate models are discussed within a South African market context. The various models are compared with respect to characteristics such as mean reversion, positivity of interest rates, the volatility structures they can represent, the yield curve shapes they can represent and weather analytical bond and derivative prices can be found. The distribution of the interest rates implied by some of these models is also found under various measures. The calibration of these models also receives attention with respect to instruments available in the South African market. Problems associated with the calibration of the modern models are also discussed.

South Africa’s history of the disempowerment of black people (Africans, Coloureds, Indians, and Chinese), presented the post apartheid government after 1994 with problems of policy formulation around empowerment of the previously disadvantaged groups (PDGs). In the wine industry, one possible way of addressing inequality in the access to economic resources and racially skewed land redistribution is through empowerment labelling of wine. Empowerment labelling of wine may promote competitiveness of wine businesses owned by the PDGs. This will help to address inequality problems in the sector. Skinner (2007) demonstrated that empowerment labelling can benefit South African wine firms in international wine markets because empowerment and Fairtrade labelled wines benefit from import preference in most European Union (EU) countries. This study investigates one possible way in which empowerment labelling may benefit wine firms on the domestic markets for wine. Several wine brands with empowerment attributes are currently traded in domestic wine retail markets in South Africa. Very few of these wine brands are broad-based black economic empowerment (BBEE) brands. If South African wine consumers value black economic empowerment in the wine industry, empowerment attribute labelling may be used to identify empowerment products, and thereby promote the competitiveness of Black Economic Empowered wine businesses. This study sets out to quantify South African wine consumers’ willingness to pay (if any) for empowerment labelled wines. Data for the study were collected in 2007 and 2008. Two methods were used for this purpose using two case studies in the KwaZulu-Natal Midlands. The first method used a revealed preference technique to determine whether a price premium exists on the current wine prices or not. Using the hedonic price analysis technique, linear and log-linear hedonic price functions for wine for two wine retail outlets in the KwaZulu-Natal Midlands were used to estimate the price premium paid for empowerment attributes in this domestic wine retail market. Explanatory variables which were found to influence wine prices were Platter’s Wine Guide quality rating, Reputation of the winery, and BBEE. Tests on the statistical fit of the models using the Park Test and residual scatter plots indicated that the log-linear model had better data fit. These two models could not be compared using the more traditional R squared and F-statistics as they had different dependent variables. The second method used a stated preference technique to estimate wine consumers’ willingness to pay for empowerment attributes of wine in the Kwazulu-Natal Midlands. Personal interview surveys of consumers at a wine cellar were conducted. The monetary value of these consumers’ willingness to pay was quantified using conjoint analysis and the conditional logistic model. Although the revealed preference techniques for consumer willingness to pay for empowerment labels showed that a negative price premium exists for these wine attributes, the stated preference technique revealed a positive willingness to pay for empowerment attributes. The monetary values could not provide the actual willingness to pay as they tended to be close to the hypothetical price of wine used in the questionnaire. This might be attributable to the prices used in the questionnaire not capturing the average actual wine prices for this specific wine retail outlet. Therefore, the monetary values were used as indicators of the ordering of attribute importance by the consumers. The results also indicated that an information gap between consumers and producers may exist. This implies that, provided that consumers are made aware of these attributes, there may be potential for wine producers to earn a price premium on empowerment attributes. Further research is required to determine whether South African wine consumers (a) value empowerment attributes (using stated preference techniques), and (b) are aware of wine brands that have empowerment attributes. The results of this study would aid government in formulating policies that promote the competitiveness of empowerment attributes such as giving machinery or inputs procurement rebates to wineries that are broad-based empowerment compliant, and in so doing, improve the economic position of previously disadvantaged groups. / Thesis (M.Sc.)-University of KwaZulu-Natal, Pietermaritzburg, 2011.

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

M.Phil. / This research aims to establish and evaluate the main factors that influence the fuel industry in South Africa. The South African fuel industry, is influenced by different business, economical and logistical factors, which all contribute to a changing fuel environment as well as a changing fuel prices that vary on a monthly basis, as calculated by the Department of Mineral and Energy Affairs(DMEA). These factors including crude oil procurement, petroleum industry, synthetic fuel industry and geographical locations, are fundamentally important, and explained in more detail in the chapters to follow. Oil as main supply source to the fuel industry, plays a vital role to South Africa as industrial developing country. The crude oil imported from the eastern countries is refined into petroleum and alternative fuels, necessary to the economy. The oil price thus influences the petroleum price, which in turn influences the cost of food and accessories. This research will for this reason also focus on aspects such as the actual importation of crude oil, petroleum price structure, price zones, synfuels and alternative fuels, and the affect these aspects have on the fuel industry.