3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Determinants of financial stress in South Africa(2017) Mmusi, Siamisang AnnaWith a globalised system, the credit crunch of 2007/2008 rippled through the global economy quickly and turned a global financial crisis into a global economic crisis, vulnerabilities in the economy surfaced when it hit and these still continue to plague South Africa today. According to the World Bank, South Africa’s real GDP growth estimates are 0.8% in 2016/2017 and 1.1% in 2017/2018. Increasing uncertainty in global financial markets and banking systems, sharp declines in commodity prices, subdued global trade, currency pressure, as well as domestic constraints such as a current account deficit, a negative inflation outlook and high levels of unemployment, lead to increased financial stress in South Africa making the country more vulnerable in the event of an adverse scenario. Clearly, being cognizant of determinants of financial stress in South Africa is of paramount importance to policy makers as it allows them to assess potential risks to financial system stability and to consider timely and appropriate counteractions while maintaining a financial system that is resilient to systemic shocks. (South African Reserve Bank Financial Stability Review, 2016) This study aims to construct a financial stress index using Principal Component Analysis to identify key determinants of financial stress in South Africa. Several variables that have been identified in standing literature as being able to capture certain symptoms of financial strain in emerging market economies are estimated then aggregated into an index using the principal component analysis method. The usefulness of the index in identifying past crises is then assessed, moreover its performance is contrasted against the financial stress index constructed by South African Reserve Bank as well as against a South African composite business cycle leading indicator. Finally, the ability of the index to predict economic activity is examined.Item Understanding the relationship between business failure and macroeconomic business cycles: a focus on South African businesses(2017) De Jager, MarinusThis study examined the relationship between business failure and macroeconomic fluctuations within business cycles of South Africa’s economy for the time period 1980 to 2016. The study also sought to understand where, if any, immediate and lag correlations between fluctuations and business failure could be established. To understand this connection, this study used longitudinal data sets of different macroeconomic factors and studied their influence on business failure. The vector error correction model (VECM) was used to determine the long-term relationship between failure and each of the other variables. Additionally, Granger Causality was applied to establish whether the macroeconomic variables investigated in this study can be constructed to predict the probability of business failures. Three classes of macroeconomic predictor variables were considered. Firstly, well-known international variables in the form of GDP and CPI were used. Secondly, the study incorporated the three Composite Business Cycle indicators- leading, coincident and lagging. Lastly, behavioural indicators were used to incorporate the views of the actual businesses and their customers, which for this the study were the Business and Consumer Confidence Indices. After examining the effects the 7 macroeconomic variables had on business failure, the study found that there is a long-run relationship between the Composite Lagging Business Cycle indicator, the Business Confidence and Consumer confidence, which influenced Business Failure. Additionally, it was noted that Business Failure influence the Composite Lagging Business Cycle indicator in the long-run. The study additionally found that Business Failure may Granger Cause the Composite Leading Business Cycle indicator Outcomes of the study are potentially vital for entrepreneurs to understand the timing of entry into markets based on macroeconomic fluctuations through their cycles in certain industries. Business owners can make proactive financial and strategic decisions vital for survival of their business through the expansion and especially in the contraction cycles of the macroeconomic environments.