Factors affecting the development of the bond market of Swaziland
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Date
2018
Authors
Matsebula, Babhekile Gugu
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Abstract
This study investigated the factors affecting the development of the local bond market in Swaziland. Governments use amongst other sources, the local bond markets to raise capital for financing fiscal challenges rather to resort to foreign debt. The local bond market in this way becomes one of the channels for raising funds locally. To measure the size of bond market development, the market capitalisation of the bond market of Swaziland over GDP was used in this study. Other measures to ascertain the factors affecting bond market development in Swaziland were added namely the total listed issued securities, the total local short term debt as a ratio of GDP and the total local long term debt as a ratio of GDP.
This study used a number of factors as independent variables that theory has proved affect the development of the bond market in other African and Asian countries. The factors that were chosen for this study and tested using secondary data available in Swaziland were capital account openness, interest rate volatility, banking sector size, size of the economy, fiscal balance, trade openness, interest rate spread, exchange rate variability, and inflation rate.
The study used previous literature and ordinary least squares models to identify the major determinants for the bond market development in Swaziland by identifying the factors that have a relationship with bond market development in Swaziland. The findings revealed that a number of variables had a statistically significant influence statistically on the bond market development in Swaziland and these were tested under different estimation equations. The findings revealed that the significant factors for Swaziland were size of the economy, fiscal balance, interest rate volatility, banking sector size, inflation rate. These factors had an inverse relationship with the bond market development in Swaziland.
From the findings, recommendations were made for policy reform and implementation with emphasis on macroeconomic policies that encourage development and address the capital flight issues especially trade openness and capital account openness. Policy recommendations were made in line with creating an enabling environment that would make the Swaziland bond market attractive to investors.
Recommendations for further research in this area were made. It was recommended that different models to test the results of this study be employed and the results be validated using different models other than least squares. It was also recommended that other factors that may contribute to developing the Swaziland local bond market be identified.
Description
A thesis presented in partial fulfilment of the requirements for the degree of
MASTER OF MANAGEMENT IN FINANCE AND INVESTMENTS
RESEARCH