In this study an analysis of the long-term equilibrium relationship between economic growth measured as real GDP growth and private capital inflows is explored. The link between private capital inflows and economic growth is well-documented in the literature. However, a void in the literature relates to examining the cointegrating relationship between private capital inflows and economic growth particularly for South Africa. It is widely claimed that private capital inflows foster economic growth by closing the savings/investment gap. However, clarity on this point is necessary because of the seemingly unclear nature of the relationship in the literature. The exact form of this relationship as well as the nature of capital flows that could impact on real growth requires further investigation. Moreover, what exactly happens to this relationship in an economic crisis such as recently recorded in the global financial crisis is not clear. The analysis is undertaken by employing cointegration and vector error correction modeling approach using quarterly data for the period 1989q4-2009q4. This study employs the Johansen (1998) cointegration test. This technique distinguishes itself since it establishes the long run relationship between variables. Thereafter, residual diagnostic checks are performed on the variables. Our results show among others, that private capital inflows have impacted positively on the growth of the South African economy. The areas for further research that emerge from this study include the effect of some government policies on economic growth that should also receive more attention in the future since political instability slows down investment.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufh/vital:11472 |
| Date | January 2012 |
| Creators | Dzangare, Gillian |
| Publisher | University of Fort Hare, Faculty of Management & Commerce |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, M Com |
| Format | 136 leaves, pdf |
| Rights | University of Fort Hare |
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