Faculty of Commerce, Law and Management (ETDs)
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Item Essays on exchange rate movements and stock returns in emerging and frontier African economies(University of the Witwatersrand, Johannesburg, 2024) Atipaga, Umar-Farouk; Alagidede, Imhotep Paul; Tweneboah, GeorgeGlobal financial markets have recently undergone significant turmoil due to numerous factors, such as economic uncertainties, pandemics, geopolitical tensions, and extreme contagion. Unfortunately, African economies are not immune to these global developments and are often impacted by risk-off sentiment. As a result, these shocks have significant consequences for African exchange rates and capital markets. Due to the region's trade and investment dynamics, African economic policymakers rely heavily on exchange rate management as a policy tool. Additionally, capital flows in the form of equities are important for Africa’s growth agenda. The research explored four distinct, yet interconnected essays related to currency and equity movements in Africa, aiming to offer valuable insights into investment and policy considerations while enriching the existing literature. The first essay explored the connection between currency movements and equities in Africa. This approach departs from the usual VAR and GARCH models and employs a tool that accounts for time-frequency co-movements. This is critical for investment and policy decisions as it better explains which part of the sample period produces shocks. Given the recent market uncertainties, this study suggests that investors can determine the right investment horizon. The bivariate wavelet technique established a profound negative correlation at the upper end of the horizon, making room for diversification opportunities. With exchange rates playing a dominant leading role, it presents a case for policy considerations towards currency stability. The partial wavelet results revealed that investors should scale down to the short end of the investment horizon during crisis periods like COVID-19. In the second essay, the asymmetric linkages were modelled between stock returns of developed economies and African markets using quantile regressions along 0.05 quantile iii | P a g e intervals. The crux of this study is to determine the options available to holders of African stocks considering market integration. Having employed the U.S. and U.K. as proxy for advanced markets, we found diversification and hedging benefits from the two advanced markets for some African equities at different time scales. The quantile-on-quantile regression results revealed that both U.S. and U.K. stocks could offer safe-haven benefits for some African equities in extreme market conditions. The findings strongly project that investors making decisions to mitigate risks must appreciate the heterogeneity in the nexus between the advanced markets and African economies to arrive at optimal risk-adjusted returns The third essay applied transfer entropy techniques for the examination of information flows between advanced and African markets. Information content analysis is vital in the current investment and portfolio management dispensation. Findings from the information exchanges indicated that some African markets have led the market integration process ahead of their peers. This study compared significant periods of global interest, such as the Fed normalisation period and BREXIT. The results present important implications for risk management strategies and policy measures to anchor markets to withstand shocks. Due to the potential scales of investments from market integration with advanced markets, African policymakers are encouraged to champion this agenda. However, this requires the need to build economies to withstand shocks. Similarly, in the last essay, the information content was modelled between currencies of advanced markets and African economies. Exchange rate spillovers have significant implications for emerging and frontier economies due to the linkages between currency performance and other key variables. The essay examined information exchanges with the iv | P a g e world’s most liquid currencies over different crisis periods. The results possess essential implications for risk management strategies and policy frameworks, especially in this current period of heightened global uncertainties. Due to the spillovers in the currency market, African policymakers should be wary about the susceptibility of their currencies to global shocks.Item Financial inclusion through WhatsApp banking in Johannesburg(University of the Witwatersrand, Johannesburg, 2022) Miller, Jade Rowan; Balabanoff,GarthApproximately three billion people will use mobile banking by 2024. Mobile devices and widespread Internet access are helping to boost mobile banking's popularity. Retail banks can now offer their customers even more convenience with mobile banking applications like WhatsApp. Consumers and financial institutions have embraced advanced technologies, including mobile banking, in recent years. Social media, mobile banking and new ideas like WhatsApp banking have made it easier for people to do business. Mobile banking is now possible thanks to high smartphone penetration and technological advancements. The fourth industrial revolution will continue to exponentially transform the modern economy. Globalisation has forced banks to open new channels to remain competitive in today's market. Banks have had to cut costs and improve their financial position by introducing new products and services. Mobile banking has grown rapidly globally due to the rapid development of information technology. Due to multi-channel distribution, most banks now have a global presence with cross-border customers. A quantitative approach was taken to examine factors that may influence behavioural intention to use WhatsApp banking in the context of financial inclusion. A questionnaire was used as the primary data collection instrument. The survey was conducted using an online questionnaire distributed to people living in Johannesburg, South Africa. The study adds to the body of knowledge by identifying factors that influence WhatsApp banking adoption, particularly in developing countries. The Technology Acceptance Model by Davis (1985) was used to investigate behavioural intention to use WhatsApp banking. My findings show that perceived trust, banking inclusion, perceived usefulness and awareness all play a significant role in WhatsApp banking adoption. Managers in financial institutions should focus on increasing consumer trust across all age groups to increase customer comfort with non-traditional banking platforms in general and thus increase financial inclusion. This is crucial because ix WhatsApp banking has the potential to bank the unbanked and underbanked while also increasing financial inclusion.Item Different forms of government regimes and covid-19 outcomes in Africa(University of the Witwatersrand, Johannesburg, 2024) Masiya, Ulemu Vanessa; Olukoshi, AdebayoThis study examines extent to which the government regime types contributed to explaining the low COVID 19 mortality and infection cases in Africa. The study analyses panel data from 54 countries in Africa across a 2-year period from January 2020 to December 2021. The following factors of demography, GDP per Capital, health expenditure, and government effectiveness were included as control variables in the models. The results of the panel regression analysis indicated that while authoritarian and partially democratic regimes were positively associated with a surge in COVID-19 cases and fatalities compared to fully democratic countries in Africa, the association lacked statistical significance. In contrast, government effectiveness and health expenditure were observed to be negatively associated with reduced COVID 19 mortality and infection rates at the 5 percent significance level. Hence, this result emphasized the role of good governance and increased health spending in managing the pandemic’s mortality and infection rates across the different types of government regimes in Africa.Item Institutional quality, capital structure and financial performance: the case of listed firms in Africa(University of the Witwatersrand, Johannesburg, 2024) Celliers, Jacqueline; Chipeta, C.; Moletsane, M.This research report examines the relationship between institutional quality, capital structure and the financial performance of firms listed on selected African stock markets. Panel data estimation techniques are carried out on a set of 347 firms from five African countries over the period 2003 to 2022 using the two-step system Generalised Method of Moments. The results show that only the Economic Freedom Index and the significance of the stock market have a significant negative effect on total leverage. The Economic Freedom Index also has a negative significant impact on short-term debt, while the legal rights index has a significant positive effect. The other measures of institutional quality included in this study, such as rule of law, control of corruption and significance of the banking sector, have insignificant effects on total- and short-term debt, while all institutional quality indicators have insignificant effects on long-term leverage. The results also indicate that all three measures of leverage have a significant negative impact on firm performance, and that institutional quality may moderate the negative effects of total- and long-term debt on the financial performance of firms but doesn’t appear to play a part in mitigating the effects of short-term leverage. This study adds value to the literature by investigating the link between institutional quality, capital structure and firm performance in Africa, as most previous studies focus on developed countries. Furthermore, it also explores the role of institutional quality in influencing the relationship between leverage and financial performance, specifically relating to firms in Africa.Item Financial inclusion, institutional quality, and poverty reduction in Africa(University of the Witwatersrand, Johannesburg, 2023) Nsiah, Anthony Yaw; Tweneboah, GeorgeFinancial inclusion is seen as an enabler to growth in an economy, as such enhance poverty reduction, especially in developing regions like Africa. Poverty levels in Africa are still very high, especially with the advent of the Covid-19 pandemic, despite efforts of governments and development partners to address it. The extant literature has provided some information regarding the financial inclusion and poverty reduction nexus in the continent and elsewhere. However, the exact threshold level of inclusion at which poverty could be altered has not been thoroughly explored. Also, the critical role institutions play in transferring the benefits of financial services to households and firms towards poverty reduction has not been extensively interrogated. This thesis therefore consists of three separate empirical studies which all intend to fill the knowledge gap, using advanced econometric methodologies. For the first essay, we examined the determinants of financial inclusion in Africa, considering demand, supply as well as infrastructure side factors. Despite the importance of financial inclusion, many factors play a role in one’s decision to get involved in the financial sector. Using the GMM technique, the study revealed that GNI per capita (demand-side factor), Domestic credit to private sector (Supply-side factor) and institution quality (infrastructure-side factor) were significantly identified to be determinants of financial inclusion in Africa. It was further revealed that GNI per capita, Money supply and Institutional quality contribute to the minimization of barriers to financial inclusion. The second essay sought to estimate the threshold level at which financial inclusion, aided by strong institutions, will lead to poverty reduction in Africa. Financial inclusion has been identified as an important concept in fighting poverty due to its ability to increase income level of households. Using the Hansen’s threshold estimation method, the study found double threshold values at which financial inclusion would increase household consumption expenditure, leading to poverty reduction. The study also established a certain threshold level beyond which, financial barriers will have a negative iv impact on consumption which has the tendency to scare households from participating in the financial sector. The results further indicated that dependency ratio, gross national income, interest rate, inflation, education, and government expenditure contribute significantly to reducing barriers to reduce poverty. Institutional quality was also found to significantly moderate the financial inclusion and poverty reduction relationship. The last but not the least essay investigated the nature of the relationship between financial inclusion, financial stability, and poverty reduction in Africa. Financial inclusion plays an important role in enhancing stability of the financial system. It has however been argued that some level of financial inclusion has the tendency to destabilize the financial system, thwarting poverty reduction efforts. Using the panel Autoregressive Distributive Lag (ARDL) model, the study found that financial inclusion is positively related to financial stability in both short and long-run, with education, GNI per capita and domestic credit to private sector positively related to financial stability and trade openness negatively related to same, in the long-run. The study further established that financial stability is positively related to consumption as such leads to poverty reduction with trade openness, government expenditure, GNI per capita, education, domestic credit to private sector and institutional quality been positively related to household consumption, as such its effects lead to poverty reduction. This indicates that financial stability plays a complementary role in the financial inclusion drive to fight poverty in Africa. It is recommended that development partners, central banks and governments in the region should consciously implement policies that are aimed at promoting financial inclusion through the strengthening of institution, due to its ability to end poverty as well as take pragmatic measures to minimize barriers to financial inclusion. Despite the financial inclusion drive, regulations must not be taking for granted in order not to compromise stability of the financial system for the joint benefit in the fight against poverty as well as ensure financial stabilityItem Banking industry response to competition from the financial inclusion paradigm in Africa(University of the Witwatersrand, Johannesburg, 2021) Kamau, Simon Muhia; Ojah, KaluThis study examines the effects of increased competition from microfinance institutions (MFIs)– reflective of the financial inclusion paradigm – on commercial banks in Africa. More specifically, I analyze the banking industry’s response to competition for financial inclusion and how the response affects the cost efficiency, asset portfolio risk, and social outreach (performance) of the banking industry. I employ panel data comprising 16 countries that possess the most advanced national banking markets in Africa, for the period 2010-2017. Fixed effects model (FE), Fractional Probit regression method (FRM), and Generalized methods of moments (GMM) are variously the main estimation techniques. I find that banks are responding to the competition for financial inclusion by increasing the supply of credit to households and SMEs, in support of the market power hypothesis of competition. Furthermore, estimation results show strong evidence that increased supply of credits to households and SMEs, in response to competition for financial inclusion, contributes positively to the banking industry’s cost-efficiency. Additionally, results suggest that increased bank lending to households and SMEs has a negative but statistically insignificant effect on banking stability. Interestingly, additional results indicate that banks’ positive response to the financial inclusion paradigm is mainly limited to the relatively wealthier segment of the low-income population. Moreover, these findings are robust to using alternative measures of competition for financial inclusion, and banking industry response, among several other robustness checks. From these results and more, I recommend policies such as enabling access to borrowers' information and supporting the development of financial market infrastructure, in order to promote competition in providing financial services to the low-income market and further drive financial inclusion. I also recommend the adoption of improved and proactive regulatory measures to ensure that competition for financial inclusion does not compromise the stability of the banking industry. Lastly, I propose policies that would ensure that competition for financial inclusion does not hurt outreach to the poorest segment of the population, as banks seek to enhance their efficiency while providing financial services to households and SMEsItem Essays on industrialisation, innovation, and sustainable development in Sub-Saharan Africa(University of the Witwatersrand, Johannesburg, 2023) Akorsu, Patrick Kwashie; Tweneboah, GeorgeSustainable development has attracted discourses from academics and policymakers for some time now. The United Nations has instituted seventeen (17) goals to promote sustainable development, and these goals have been decomposed into 169 sub-goals to be achieved under the 2030 agenda for sustainable development. The goals are essentially grouped into economic, ecological, and social goals. Following this, the African Union (AU) has embraced the SDGs by motivating member countries to come up with programmes that are directly related to the goals. However, whereas a lot of discussions have occurred, much of the talk has been oblivious to empirical data analysis. The AU has realised the importance of industrialisation in spearheading the bridging of the poverty gap in Africa. Industrialisation is seen as the panacea for job creation, prosperity, and wealth creation. Industrialisation induces innovation by introducing new equipment, new production techniques, increasing capacities and spreading improvements across sectors of the economy. However, since the 1990s when the policymakers started talking about industrialisation, not much has been achieved on that score. Common to industrialisation and economic development is financial development. The level of financial development can stimulate positive or negative externalities on sustainable development. The drive towards the promotion of sustainable development in Africa by the African Union and other parastatal bodies, especially the UN, motivated this thesis to examine the convoluted connections between financial development, technological innovation, industrialisation, and sustainable development in Africa in three related studies. The first study analysed the complementary role of financial development in the relationship between industrialisation and sustainable economic development in Africa. The system dynamic Generalised Method of Moments (GMM) technique was employed with a dataset covering 2010-2019 for 48 African countries. Under this analysis, this thesis found that Industrialisation, Innovation, and Sustainable Development in Africa © Patrick Kwashie Akorsu, 2023 industrialisation is a significant positive driver of economic development. The role of financial development in the economic development agenda among African economies was also emphasised by the results. The outcome of the moderation analysis suggested that the level of financial development significantly complements industrialisation towards improving economic growth. Thus, a more developed financial sector is potent in building an industrial economy which facilitates value addition in the manufacturing sector. The second empirical analysis examined the interactive role of technological innovation in the relationship between financial development and sustainable development in Africa after controlling for the influence of ICT infrastructure, trade openness, inflation, and population size. The results indicated significant effects of financial development on sustainable development as well as significant relationships between technological innovation and sustainable development. In terms of social sustainability, the findings suggested that financial development tends to reduce social sustainability among African economies such that increasing the quantum of broad money and increasing the amount of domestic credit to the private sector either by households or by banks would not necessarily improve the level of social development in Africa. Concerning economic sustainability, the findings divulged a positive relationship between financial development and the economic dimension of sustainable development (i.e., economic sustainability), suggesting that African countries could leverage financial development, particularly by encouraging the supply of credit to the private sector either by households or banks to enable industries to improve their operations. As regards ecological/environmental sustainability, findings from this empirical analysis indicated mixed relationships between financial development and ecological sustainability. Thus, depending on the proxy, financial development either increases or decreases energy consumption and carbon dioxide emissions in Africa. Meanwhile, the effect of technological Industrialisation, Innovation, and Sustainable Development in Africa © Patrick Kwashie Akorsu, 2023 innovation on sustainable development was positive for all dimensions of sustainability but had varied implications. This emphasised the need to analyse how sustainable development is affected by the interaction between financial development and technological innovation. The findings from the moderation effect divulged that more technological innovation lessens SDI but increases GDP growth per capita, carbon dioxide emissions, and energy consumption. The last empirical chapter revealed investigated the interactive role of technological innovation in the relationship between financial development and sustainable development in Africa. The findings from such an analysis highlighted the complementary role of technological innovation in the relationship between financial development and sustainable development in Africa. In an era of an increasing need for sustainability, these findings stressed the need to further ascertain possible convolutions between sustainable development, technological innovation, and industrialisation among African economies. The impetus for this analysis partly stemmed from the fact that industrialisation has some externalities it poses to economies. Therefore, there was a need to provide empirical evidence that helps understand the true role of industrialisation in the relationship between technological innovation and sustainable development to foster policy formulation. Upon analysing the mediating effect of industrialisation on the relationship between technological innovation and the three dimensions of sustainable development (social, economic, and ecological/environmental sustainability) in Africa, positive relationships between technological innovation and all dimensions of sustainable development, emphasise the need to analyse how sustainable development is indirectly affected by industrialisation. The findings provide evidence of a partial contribution from industrialisation toward the impact of technological innovation on sustainable development. As a result, this thesis Industrialisation, Innovation, and Sustainable Development in Africa © Patrick Kwashie Akorsu, 2023 concluded that the level of industrialisation complementarily mediates the relationship between technological innovation and sustainable development in Africa. The study recommends that economies within Africa should focus on industrialisation and financial development to achieve sustainable development. Policymakers should prioritise the development of a resilient financial sector to complement industrialisation, while promoting technological innovation to support all dimensions of sustainability. Also, a balanced approach to sustainable development should be promoted by managing the trade-offs between sustainability dimensions. Finally an effectively coordinated set of policies should be put in place to reduce negative externalities resulting from industrialisation, and policymakers should carefully select implementation policies and channelsItem Testing assets pricing models on Africa’s mutual fund industry(University of the Witwatersrand, Johannesburg, 2022) Moola, Ahmed; Kodongo, OdongoThis paper concentrates on testing various asset pricing models on mutual fund returns in six African countries. The various asset pricing models include the CAPM, the Fama-French threefactor model, the Carhart four-factor model, the Fama-French five-factor model and the FamaFrench six-factor model. The models performances were evaluated using a range of performance measures and the best performing asset pricing model was identified in each country as well as across the African mutual fund industry as a whole. With the CAPM being deemed as unable to fully explain returns, it led to the development of new models including more factors that were thought to be vital in explaining returns. The top performing asset pricing model across the African mutual fund industry is the FamaFrench five-factor model as it outperforms both the CAPM and the Fama-French three-factor model. Diving deeper and looking at the performances of the models in each country, the results tend to differ. For South Africa, different models outperform the others across the different metrics, however, for the remaining sample countries, the Fama-French five-factor model outperforms the other models across most performance measures. Across all countries, except South Africa, the profitability factor, RMW, is the only nonredundant factor. All the other factors jointly explain one another. For South Africa, the momentum factor is non-redundant for both the Carhart four-factor model and the FamaFrench six-factor model.Item Essays on private capital flows and real sector growth in Africa(2021) Asamoah, Michael EffahGlobally, countries continue to implement policies aimed at the attraction and retention of capital flows due to its perceived significant effect on economic growth and development. The benefits of capital flows are touted as being able to drive down domestic interest rates, smooth consumption, transfer of technology and improve the functioning of the financial sector. In as much as there is a copious body of literature on capital flows and economic growth, there remain essential areas that the literature has been silent. Among these are capital flows and real sector growth in the light of the allocation puzzle; the real sector amid financial sector development and institutions; private capital flows-macroeconomic volatility-financial development connections, and thresholds in the capital flows-real sector growth dynamics. Filling these gaps will provide the needed knowledge and policy directions on how countries that are known to depend on capital flows can harness these flows for growth and development, especially at the level of the real sector. Using robust econometric procedures, this study examined four thematic areas of capital flows in Africa. The first essay investigated the evidence and/or otherwise of an allocation puzzle and bi-directional relationship between private capital flows and real sector growth. The study covered 42 Sub-Saharan African (SSA) countries between 1980 and 2017. We used growth in manufacturing, industry, agriculture, and services to capture the real sector and proxied private capital flows by foreign direct investment, portfolio equity flows, and private non-guaranteed debt. We employed the two-step dynamic systems GMM model to establish our empirical relationships. We found no evidence in support of the allocation puzzle, which suggests that SSA countries with relatively high growth in the real sector will attract more private capital. However, at a decomposed level, we established a bi-directional relationship of a positive association between debt flows and growth in agriculture and services, with no evidence of an allocation puzzle. Though we found a bi-directional association between debt and industrial growth, the association was detrimental in both directions. Also, the study established a two-way inverse reverse effect between equity flows and manufacturing growth. Finally, while the impact of foreign direct investment on the real sector is positive at the disaggregated level, there is a positive bi-directional effect between foreign direct investment and growths in manufacturing, industry, and service value additions. The study provides a strong foundation for an alternative source of financing, especially for the growth of the service and agriculture sectors regarding debt and equity, from the reliance on the traditional FDI. The findings also indicate parallel reactions between real sector growth and private capital in SSA. The second essay had two separate objectives fused into one. The first part examined the brinks of financial development at which private capital to Africa enhances growth at the level of the real sector. We deployed a newly developed financial development dataset to moderate the association between private capital and the real sector, and the Lewbel instrumental variable two-step GMM estimator (IV –GMM), with Kleibergen-Paap robust standard errors and orthogonal statistics in establishing our empirical relationships over the period 1990 to 2017, for a sample of thirty (30) countries in Africa. Initial estimations at the overall level of the real sector, manufacturing, and industry show that FDI has no growth effects and even worsens the growth of the agriculture sector. Financial development stifles growth. On decomposing the real sector, we found the interaction between FDI and financial development to enhance the growth of the real sector and its components at face value. However, our marginal effect analysis shows that the growth impact of FDI on the overall real sector, industry, and service sector growth starts at the threshold level of the 25th percentile of financial development, while the growth impact on manufacturing is only evident at the 90thpercentile of financial development. Finally, although financial sector growth aids foreign direct investment in enhancing the growth of the agriculture sector, it cannot wholly eradicate the initial adverse impact from FDI. We further found that portfolio equity has no growth impact on Africa’s real sector, while debt flows harm the overall real sector, manufacturing, and industrial growth, but no impact on agriculture and services’ growth. We found that financial development reinforces the conservative view that capital flows enhance economic growth, but the reinforcement depends on the type of sector, either debt or equity, and the percentile levels of financial development. A similar objective was to analyze the interconnections between private capital flows, the quality of institutions, and the growth of the real sector in Africa. The study covers thirty (30) African countries. Our empirical analysis, with a panel data between 1990 and 2017, indicates that private capital flows (FDI, private debt, and equity) have no direct impact on the growth of the real sector. A decomposition divulges that FDI has no impact on manufacturing and detrimental to industrial and agriculture sectors. Portfolio equity is injurious to growth in services and unresponsive to the growth of all other sectors. Private debt was also insensitive to the growth in agriculture and services, and even damaging to manufacturing and industrial growth. Initial assessments show that countries with robust institutional frameworks can benefit significantly from capital flows, as we found institutions do moderate the positive impact of capital flows on the growth of the real sector, starting from the 25th percentile of institutions. Our marginal analysis confirms that the impact of private capital on real sector components is dependent on the type of capital, the sector, and the percentile level on institutions, in some cases, as far as the 90th percentile. Our results show that for policy implementation, it is not a case of one cup fits all, but sector-specific capital flow institutional policies should be the way forward. The orthodox view is that uncertainty is a deterrent to investment, and by extension, private capital inflows. Paying specific attention to the volatility of the domestic exchange rate, private capital flows and a newly developed indicator of financial development, the third chapter of the thesis examined the impact of exchange rate uncertainty on private capital flows, and whether financial development matters in such association. Specifically, the study sought to answer four questions: Is the exchange rate uncertainty –capital flows nexus strictly monotonic? Does exchange rate volatility deter capital flows? Can financial development mitigate the adverse effect of economic uncertainty on capital flows? At what threshold point does financial development jettison the negative impact? The study covers 40 countries over the period 1990 –2017. We establish our empirical relation with a system general method of moments (GMM) two-step robust estimator with orthogonal deviations. We found evidence in support of anon-linear U-shaped relationship between uncertainty and capital flows, and that the impact of uncertainty on capital flows depends on varying levels of uncertainty. We also document that uncertainty deters all forms of capital flows, and that countries with a well-functioning financial system can transform the adverse impact of volatility on capital flows. However, our marginal analysis shows that curbing the adverse effect of volatility on private capital depends on the type of capital flow, the indicator as well as the percentile level on financial sector development, in some cases as far as to the highest percentile. We further established that with the current state of the financial sector, financial institutions’ development offers the quickest route to curtailing the adverse impact of volatility on capital flows, as it has a lower threshold value or critical point compared with financial markets’ development. In the final essay, we investigated the possibilities of non-monotonic or nonlinearities in the capital flows - economic growth dynamics, as some studies posit that the effect of capital flows on economic growth changes course after attaining a certain threshold level, either based on the levels of capital flow itself or some mediating variables. We proxied capital flows by foreign direct investment (FDI) inflows and growth by real sector components. With data from 1990 to 2018, for a sample 36 African countries, the study employed Seo and Shin (2016) dynamic panels threshold effect with endogeneity as well as Seo et al. (2019) estimation of dynamic panel threshold model using Stata to achieve the study’s objectives. In the first part of the analysis, we employed three indicators of human capital development as threshold variables, and FDI flows as the regime dependent variables. These are the mean years of schooling, gross national secondary school enrolment, and primary school pupil to teacher ratio. In the subsequent analysis, we deployed FDI as both the threshold and regime dependent variable. The study found significant thresholds in the capital flows -real sector growth relationship as mediated by human capital and foreign direct investment. The significance impact of foreign direct impact on real sector happens at both the lower and upper levels of the mediating variable but the component of real sector matters. We established that in most cases, the impact of FDI on the growth of the real sector is harmful in the lower regime and beneficial in the upper regime of human capital for both manufacturing and services sectors, and vice versa for both agriculture and industrial sectors. The results indicate that increasing levels of human capital development and FDI inflows are necessary for the growth impact of FDI on Africa’s real sector, but not under all sectors as he results are dependent on the varying threshold variables of both human capital and foreign direct investmentItem Cryptocurrencies and African financial markets: integration, risk analysis, and diversification(2021) Kumah, Seyram PearlThe international financial system has witnessed cryptocurrencies as new financial instruments with increased growth in both volume and value and unique risk (return) benefits. The cryptocurrency market is integrating with financial markets which may induce increased investor participation with the chance of excessive liquidity in the cryptocurrency market. This can impair financial stability should there be shocks to the cryptocurrency markets. However, there is as yet little established scientific knowledge about the impact of cryptocurrencies on financial markets with African financial markets completely untouched. Such knowledge is critical since shocks to cryptocurrency markets may have rippling effects on the financial markets. The thesis contributes to fill this gap by investigating the nexus between cryptocurrencies and traditional asset classes in the African financial markets. This may help in understanding the microstructure of financial markets in general and the functioning of African markets in particular for regulating the general financial system. The thesis is organized into four empirical essays, each focusing on a research problem. The first essay examines the level of integration between cryptocurrencies and African stock markets using wavelet-based methods. Findings suggest low degrees of integration between the markets at higher frequencies, but this grows stronger at medium frequencies and perfectly integrates at lower frequencies. Implying that stock markets in Africa are highly exposed to cryptocurrency market disruptions from the medium-term and international investors seeking to hedge their price risk in African stock markets using cryptocurrencies may have to look at the short-term. The phase difference arrow vectors and cross-correlation analysis implying lead (lag) effects are time-varying and heterogeneous, showing no particular cryptocurrency or stock market as leader or follower. Different markets have the potential to lead or lag other markets at varying scales which may induce arbitrage opportunities for international and local investors. The second essay tests the ability of cryptocurrencies as viable alternatives to African fiat currencies during turbulent and tranquil currency conditions implementing the ensemble empirical mode decomposition-based quantile-in-quantile regression. The essay establishes that cryptocurrencies behave differently from African fiat currencies, showing significant negative relationship during extreme fiat currency regimes at medium and lower frequencies. This suggests cryptocurrencies as viable alternative digital currencies and good hedges for African fiat currencies form the medium-term. This essay affords policymakers in Africa and across the globe seeking for viable alternative digital currencies to mitigate currency crises to consider cryptocurrencies from the medium-term. Forex traders may also compensate for losses from currency shocks by using cryptocurrencies to hedge USD/African fiat currency exchange rate risk. In the third essay, we perform cryptocurrency market risk analysis focusing on tail risk and frequency spillover connectedness. The FZL function for joint Value-at-Risk and Expected Shortfall was used to measure tail risk, compare the level of risk, and capital adequacy of cryptocurrencies. Findings suggest Ethereum and Steller as less risky, followed by Monero, Das, Litecoin, Bitcoin, and Ripple, implying that Ethereum and Steller require the least capital to absorb losses. Investigating the time-varying interconnectedness across cryptocurrencies, the study posits that cryptocurrencies are strongely interconnected at high frequencies suggesting contagion risk in the cryptocurrency market and that diversification opportunity is low in the short-term. The essay also evidences time-varying volatility shock transmissions across cryptocurrencies. Economic actors interested in cryptocurrencies can follow this easy to hedge, calculate margins, and capital required to ensure financial stability in the global economy. The fourth essay sheds light on the hedging properties of seven cryptocurrencies (Bitcoin, Litecoin, Ethereum, Das, Ripple, Monero, and Steller) for gold and crude oil price fluctuations at bear (bull) markets across time employing wavelet-based quantile-in-quantile regression. The essay finds that cryptocurrencies provide negative dependences for extreme gold and crude oil price fluctuations from the medium-term, and that all cryptocurrencies are hedges for gold price fluctuations but only four cryptocurrencies (Ethereum, Monero, Ripple, and Steller) are hedges for crude oil price volatilities. The essay also evidences bidirectional causal effects among the assets establishing that when the cryptocurrency market is bearish and the price of gold and crude oil is low, economic actors can hedge the downside risk of the commodities or cryptocurrencies across time using either of the assets. The essay provides precise information to economic agents on risk mitigating strategies for gold and crude oil markets