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This paper seeks to analyse the impact of government debt and other macroeconomic variables on the long term bond yield for South Africa. Recent increases in the government budget deficit and its corresponding borrowing has renewed interest in understanding fiscal dynamics within the economy. The study employs both the linear and non-linear Auto-regressive distributed lag (ARDL) technique to estimate the determinants of the long-term bond yield. Our results show that the short-term interest rate is the major determinant of the long term yield in both the short-run and long-run. Government debt and the US long term yield positively impact long term bond yields both in the short-and long-run. The rate of inflation, economic growth, nominal effective exchange rate and bank credit all have negative effects on the bond yield in the long-run. Tests for non-linearity reveal that the short-term interest rate has an asymmetric relationship with the long-term bond yield. However, we only establish non-linearity between government debt and bond yields in the long-run. We suggest complementarity between monetary policy and fiscal policy, a systematic program of deleveraging and implementation of structural changes aimed at increasing production.

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PurposeThis study evaluates the impact of government social protection interventions on households’ welfare in South Africa.Design/methodology/approachThe study uses survey data comprising 393 observations and the multinomial logistic regression technique to analyse the effect of government interventions on households’ welfare. For robustness purposes, a negative binomial regression model is also estimated whose results corroborate the main results from the multinomial regression model.FindingsThe study’s findings show that government economic interventions through social protection significantly reduce the likelihood of a decrease in household income or consumption. COVID-19 grant/social relief of distress grant, unemployment insurance, tax relief and job protection and creation are all significant in sustaining household income and consumption.Practical implicationsThe findings have policy implications for social development. Specifically, the findings support the use of government social protection as a safety net for low-income groups in South Africa.Originality/valueThe study presents preliminary evidence on the effectiveness of several measures used to ameliorate the COVID-19-induced recession within the South African context.

The last two decades have seen a sharp increase in shadow banking activities in both advanced and emerging economies. Shadow banks have therefore become an important part of financial markets due to their credit creation and capital allocation roles. This study investigates the impact of shadow banking on firm profitability in South Africa and evaluates the linkages between shadow banking and real economic activity. We employ single-equation cointegration methods and three measures of firm profitability in our analyses, and several macroeconomic and bank-specific variables are used as control variables. Our results are mixed showing that shadow banking has a negative impact on traditional banks' profitability whilst on the other hand it positively impacts non-financial firms and the overall measures of firm profitability. Our results indicate that both non-financial firms and non-bank financial institutions could be benefiting from the expansion in shadow banking activities. Targeted, functional regulation is suggested in order to promote economic activities in the shadow banking sector whilst at the same time limiting possible risks that may arise.