This thesis provides an empirical analysis of the relationship between the value premium and financial distress. Measures of leverage and default are used as proxies for financial distress. Using both an international data set, 1991 to 2006 and a long time series data set for the United States, 1927 – 2007, the thesis adds knowledge about the role of the value premium in asset pricing theory. Generalised autoregressive conditional heteroscedastic modelling (GARCH) is used and information gathered on the volatility of the value premium. A vector autoregressive (VAR) framework and Granger Causality tests are utilised in order to offer a deeper examination of the relationship between risk premium and economic activity. The results add further evidence to support the view that the value premium appears to be linked to variables associated with financial distress, although it is noted that this does not necessarily mean that participants in financial markets behave rationally.

Venezuela experienced one of the most dramatic political transformations of the twentieth century. After initially developing a system of representative democracy hailed among the most resilient in the Western Hemisphere in the 1950s, the country endured wave after wave of economic turmoil until, in 1998, Hugo Chávez was elected to the office of the Venezuelan presidency, fundamentally altering the governmental structure of the country and contributing to the desperate economic conditions Venezuela finds itself in today. This thesis attempts to explain the societal factors that led to Chávez’s election through an examination of Venezuelan economic policy in the final decades of the twentieth century. By charting the attempts made by specific Venezuelan political actors to address the unique conditions and dilemmas generated by the country’s largely oil-based economy during this period, it is argued that the economic policies enacted by Venezuela’s representative democracy systematically failed to address the needs and concerns of the country’s poor and working classes. As a result, political disillusionment among these social groups became increasingly more pervasive, finally reaching its full expression in the election of Chávez as an outsider candidate pledging to overhaul the Venezuelan political system in favor of poor and working class social sectors. Moreover, this text attempts to situate Chávez’s election as the result of a broader trend of inadequate economic policy beyond the commonly examined neoliberal reforms of the 1990s and ultimately serves to caution against an economic worldview that overlooks potential repercussions for society’s most vulnerable sectors.

Very little has been written about the effect that oil prices have on manufacturing output in the United States. This paper aims to shed light about the effect of oil prices, oil imports, and GDP on U.S. manufacturing output through a four-variable vector autoregression and explain the timing of these shocks through impulse response functions. Empirical results find that oil prices are significant in determining manufacturing output, but manufacturing output is also significant in determining oil prices.

Japan has experienced a prolonged stagnation since bursting the asset market bubble early in the 1990's. It is very important to understand the underlying problems in order to find a remedy to escape this stagnation. This thesis aims to theoretically analyse the current Japanese economy, especially from the viewpoint of multiple equilibria. According to this view, the same fundamentals can yield a multiple outcome depending on history or expectations. This thesis argues that Japan's situation can be regarded as a bad equilibrium which has been provoked by wide-spread pessimism and a bubble collapse. Three chapters independently attempt to construct theoretical models describing the current Japanese situation. Chapter 2 demonstrates that demand externalities yield multiple equilibria. In a bad equilibrium, firms dare not participate in trade, which causes aggregate demand and welfare to decrease. A global games approach then illustrates how equilibrium is selected. Chapter 3, with the objective of seeing if Japan's depression was provoked by the misconduct of monetary policy, investigates the relation between indeterminacy and a monetary policy rule using a sticky price and firm-specific investment model. The standard Taylor principle is shown to be almost sufficient to eliminate indeterminacy, which suggests that the Bank of Japan did not exacerbate the economy while interest rate rules functioned, that is, until 1999. Chapter 4 focuses on a zero nominal interest rate bound, which has been observed since 1999. The ineffectiveness of the monetary policy yields a bad short-run outcome where real economic activity and asset prices become lower. There are long-run multiple equilibria in this story, and that is our explanation for the problem. Within this model, however, our .analysis does not justify a claim that a zero bound for the interest rate causes a long-run equilibrium to be a bad one.

M.A. / Financial markets are rapidly integrating into a single global market place, and developing countries including South Africa, are increasingly part of this process. The process is being driven by both the push and the pull factors in both developed and developing countries. Nevertheless, the overwhelming majority of the developing countries still need to create the conditions to attract long-term capital flows. Although South Africa has been attracting capital flows since the 1990s, the level is not sustainable because it mainly attracts shortterm capital. It has failed to attract long-term capital on a sustainable basis because of economic and political crises facing the country. Thus, the South African government needs to build the kind of macroeconomic, regulatory and institutional environment that channels this private capital into broad - based and sustainable growth.

This study estimates the size of the informal economy in South Africa, evaluates the macroeconomic implications of this, and then concludes with possible effects that all of this might have on policy. The research is conducted as a South African case study, and uses time-series analysis for the period 1966-2002. Recently there has been a revival of interest in the informal economies of a number of countries. The revival has been driven largely by an increase in the size of informal economies, in both absolute and relative terms. South Africa is no exception to this trend: more and more people are entering the informal economy. The rapid urbanization of the black population, the slow pace of economic growth, the decrease in the incidence of formal employment, the promotion of small-, medium- and microenterprises (SMMEs), as well, finally, as the so-called ‘informalization’ of formal businesses are all factors contributing to the recent growth in the South African informal economy. There is not much literature on the South African informal economy, and what there is tends to be narrow, specializing in particular aspects of the informal economy. Moreover, the subject is controversial: there seems to be little agreement on the definition and use of informal economy estimates in both economic analysis and policy-making. In response to this situation, therefore, the present study examines the problem of defining the informal economy and considers the reasons why people might prefer to operate in the informal economy rather than in the formal economy. By III examining the various definitions of the South African informal economy and by looking at the reasons why people are operating in it, it is possible to gain an understanding of the various approaches used in international literature on the subject to measure the economic contribution of informal economies. A critique of the different approaches suggests that the currency demand approach is an appropriate method for measuring the informal economy in a developing country such as South Africa. The results of the analysis indicate that while the size of the informal economy stood at an average of 9.5% of GDP for the period 1966-2002, the size of the informal economy during the period 1966-1993 decreased. After 1993, the size of the informal economy remained relatively constant. These estimates of size are then used to test the nature of the relationships between the informal and formal economies. It was found that the informal economy has effects in, and on, the formal economy. This finding suggests, ultimately, that an increase in the size of the informal economy will ultimately contribute to an increase in the growth of the economy as a whole. These findings are used in the present thesis in the formulation of policy recommendations regarding the regulatory and macroeconomic policies currently in place in South Africa. The recommendations cover many areas: variable bias, monetary policy, fiscal policy and taxation, capital markets, and employment policy. Areas for further research are also indicated. The study concludes that macroeconomic policy which largely ignores or neglects the informal economy in its modelling IV and planning increases the likelihood that such policy may be overly contractionary, or that it may have unintended consequences. As a consequence, the South African informal economy should be included in all macroeconomic models – whether monetary, fiscal, or development models. The due consideration of the informal economy takes on even further significance in the South African context: it consists largely of the formerly disadvantaged and vulnerable groups of society – the very people who have been given priority in the government’s broad medium-term macroeconomic policy (i.e. GEAR). The estimates presented in this study should therefore make a contribution to macroeconomic modelling and planning. / Prof. Elsabe Loots

Masters of Management in Finance and Investments, University of the Witwatersrand Johannesburg, 2016 / Financial economists have spent a considerable amount of time trying to understand the impact of macroeconomic news announcements on exchange rates, more so evaluating how new information is incorporated into exchange rates. This study examines the impact of macroeconomic news announcements on exchange rate volatility. Unlike most studies that utilise developed market currency pairs, this study utilises high frequency USD/ZAR data. Macroeconomic news can affect exchange rates directly and indirectly through public and private information. However, this study only focuses on scheduled macroeconomic news announcements as they usually have market forecasts available to conduct analysis regarding the asymmetric news effects. The following asymmetries are evaluated into the study: news items by geographical location, no-news vs. surprise news announcements and positive vs. negative news announcements. We make the following findings in our empirical study: (i) After the release of a news announcement, the level of foreign exchange volatility rises. This event is independent of whether the news item surprised the market or not. (ii) We find that both South African and US news items significantly impact USD/ZAR volatility, suggesting that both US and South African news items are being used to formulate investor expectations regarding the future prospects of the currency pair. (iii) Negative news appears to have a greater impact on exchange rate volatility relative to positive news. This result is also state dependent, as investors tend to behave differently to news depending on the economic climate at that point in time. Investor cognitive biases also give rise to the asymmetric news effects on exchange rate volatility. Investors do not always act in rational manner, especially when faced with multiple news items that are contradictory to each other. / XL2018

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand in partial fulfilment of the requirements for the degree Masters of Management Finance and Investments / There is plenty of research examining the relationship between surprise macroeconomic data and financial returns, however, in a South African context, such research is scarce. This paper adds to the event study body of knowledge by studying the effects of South African macroeconomic announcements on South African financial returns and juxtaposing that with the relationship of surprise macroeconomic announcements released in the United States with the same local financial instrument returns. In this study, the review period is 10 years starting the beginning of 2006 and ending at the end of 2015. Two strands of economic news are studied, monetary news and real activity news against an equity futures index as a proxy for the South African Stock market; the R186 government bond as a proxy for the South African bond market and the spot US dollar to South African rand exchange rate. The monetary announcements studied are the interest rate adjustments of the South African and United States Central Banks and the consumer price index. The real activity data studied are the unemployment rate; the retail sales and the gross domestic product releases. Many of the findings in this paper were in line with much of the literature where evidence shows that monetary policy has a significant effect on fixed income and forex rates. Stocks were also to be shown to be sensitive to both types of data. The regression specification used in this study shows that local equities are more sensitive to both types of news, although mainly to South African news. Only monetary surprises are shown to be sensitive to the bond market and surprises from both countries. Evidence is that the rand is only sensitive to the interest rate announcements released in the United States. / MT2017

Research presented for the degree of Masters of Management in Public Policy to the Faculty of Commerce, Law and Management of the University of the Witwatersrand, School of Public and Development Management. March 2016 / The purpose of this study is to analyse the changing nature of South Africa’s Macroeconomic policy in the post-apartheid era for the period 1994-2010. The key focus of the study is to uncover the factors that are a direct cause or have contributed to the paradigm shifts in policy during the specified period; supplementary to this, the study will look at how the changing paradigms have contributed in ridding the South African economy of its apartheid legacy, characterised by the triple challenges of poverty, unemployment and inequality. This study has a strong qualitative approach, comprising a comprehensive document review process, as well as 8 in-depth interviews with relevant experts in the field. This is further complemented by a supplementary quantitative analysis of key socio-economic data and statistics. The findings are that the observed paradigm shifts in macroeconomic policy during the period under review are a result of a number of key factors, namely: the changing domestic political discourse; the global and domestic economic climate; and the influence of domestic institutional arrangements, all of which have a direct impact on the policy discourse. Despite these paradigm shifts, South Africa continues to be faced with the triple challenge of poverty, unemployment and inequality; macroeconomic policy in the democratic dispensation has failed to deliver the core aims of South Africa’s economic development strategy. With the failures of orthodox neo-liberal macroeconomic policy, and the apparent shortcomings of Keynesian influenced redistributive macroeconomic policy, the key question facing policy makers is what direction South Africa’s Macroeconomic paradigm should follow. The idea of the developmental state, and its success in building emerging economies in South East Asia, is considered a viable option for South Africa to achieve an inclusive growth path. / MT 2018

Esse trabalho faz um estudo sobre a hipótese de descolamento das relações de curto e longo prazo entre os PIBs das economias brasileira e norte-americana. Para isso, é realizado, inicialmente, uma análise da literatura existente sobre a possível mudança nas relações entre as economias emergentes e avançadas. Em seguida, foram apresentadas explicações teóricas para as ligações entre os PIBs de Brasil e dos Estados Unidos da América. As metodologias usadas na investigação foram a análise de cointegração e a decomposição dos produtos internos brutos dos países em questão. Os principais resultados, obtidos usando dados anuais entre 1980 e 2008, apontam para uma mudança importante nas relações de longo prazo entre as economias a partir da década de 1980 e uma intensificação das relações de curto prazo a partir da década de 1990. No entanto, ao longo dos anos e, principalmente a partir da metade da década de 2000, foram encontradas evidências em favor de um maior descolamento de curto prazo dos PIBs de Brasil e EUA. / The following dissertation tests the hypothesis of decoupling between the Brazilian and North American economies. For this purpose, the related literature is initially investigated. Afterwards, theoretical explanations on the links between the GDPs of Brazil and USA are shown. The methodologies employed were cointegration analysis and trend/cycle decomposition of the GDPs of the mentioned countries. The main findings using annual data between 1980 and 2008 point out to an important change in the long term relationship between the economies starting in the 1980s and an increase in the short-run links during the 1990s. However, there is evidence suggesting a decoupling of the short term fluctuations between Brazils and USAs GDPs starting in the second half of the 2000s.