Wits Business School (ETDs)

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    The relationship between the performance of Johannesburg Stock Exchange and economic growth in South Africa
    (2021) Magomana, Mallson
    This research focused on measuring the relationship between the Johannesburg stock market performance and economic growth as an option for boosting economic growth. Even though there have been a lot of studies with regards to the impact of Stock market growth to economic growth, very few of these have been directed to the Southern African nations. Second, these studies had different results, some suggesting a positive long-run relationship between the stock market and economic growth, and some established that there is no long-run relationship. The purpose of the research is to investigate the longrun and shortrun relationship between the JSE performance and economic growth in South Africa. It also investigates the direction of the causality between JSE’s overall performance and economic growth in South Africa. The research uses the ARDL bound cointegration model (Suggested by Pesaran, Shin & Smith 2001) to test the availability of a longrun relationship between the variables of stock market growth and economic growth on quarterly data from 2006 to 2018. The Granger causality test was used to test the pairwise relationships between the individual variables. The ARDL bounds testing results showed evidence of a longrun relationship between economic growth and the variables of stock market performance. The availability of a long-run relationship between the stock market and economic growth opens an avenue for policymakers that can be utilized for economic recovery. The Granger causality test showed evidence of a bidirectional causality between Economic growth and Gross Fixed Capital Formation and between Market capitalisation and JSE all share index. It also showed that Johannesburg Stock Exchange’s All share index (Jalsh) granger causes Economic growth. This relationship needs to be exploited so that it can benefit the economy in the longrun. The shortrun model showed that there is a relationship between economic growth and Gross Fixed Capital Formation and Labor Force. However, the relationship with the other measures of stock market performance is not clear in the shortrun with regression coefficients that are not statistically significant at 5% significant level. Fundamentally, the research revealed that the relationship between the stock market and economic growth depends on the proxies used to represent the stock market. This is important as it may be one of the reasons for mixed results in the previous literature, thus, caution is needed, and one may need to consider the proxy that best suits the stock market measure. The research adds to the already available literature and can be used as a reference point for other studies in the SADC region. The study offers a relevant solution to the allocation of financial resources with a goal to boost economic growth. It also illuminates the need for a well-developed financial system that allows for a smooth intermediation process complimenting stock market growth and thereby increasing economic growth.
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence