Equity, Bonds, Institutional Debt and Economic Growth: Evidence from South Africa

Abstract

We examine the finance-growth nexus in South Africa accounting for the role of bond markets, stock markets, and bank and non-bank financial intermediaries using a vector autoregressive technique. Extant empirical literature has largely accounted for only banks and stock markets, ignoring bond market and non-bank financial intermediaries. We find that bond market development affects economic growth in South Africa, and no similar effect is observed for the bank and non-bank financial intermediaries and the stock market. Our finding shows that examination of individual elements of the financial system is important in understanding the unique effect of each on growth. The observation that the bond market rather than stock market, bank and non-bank institutions promote economic growth in South Africa induces an intriguing question as to what unique roles bond markets play that the intermediaries and equity market are unable to play. JEL Classification: G10, G21, O16

Financial Access and Productivity Dynamics in Sub-Saharan Africa

“…Third, the attendant contemporary literature on productivity has fundamentally focused on inter alia: productivity externalities that are driven by foreign investment (Fanta & Makina, 2017;Dunne & Masiyandima, 2017); variations in the distribution of labour and concerns about gender (Elu & Price, 2017); the relationship between exports and manufacturing (Cisse, 2017); education characteristics and intensity of children engagement in the labour market (Ahouakan & Diene, 2017); investigation of gaps in output in relation to potential economic productivity (Fedderke & Mengisteab, 2017); the engagement of women to improve productivity in the argricultural sector (Uduji, Okolo-Obasi, 2018a; the moderating importance of value chains on the impact of foregn investment on economic growth and productivity (Meniago & Asongu, 2019); investigation of nexuses underpinning TFP and the manufacturing sectors with relevance to cross-sector differences in the growth of productivity (Kreuser & Newman, 2018); the importance of information technology in convergence in TFP (Maryan & Jehan, 2018) and financial access and TFP in SSA (Bokpin, Ackah & Kunawotor, 2018).…”

On the simultaneous openness hypothesis: FDI, trade and TFP dynamics in Sub-Saharan Africa

“…The first on TFP-oriented scholarship has fundamentally focused on, inter alia: gender disparities and labour supply in SSA (Elu and Price 2017); the rate of child labour and schooling features (Ahouakan and Diene 2017); linkages between manufacturing and exports (Cisse 2017); examinations of nexuses between manufacturing firms and TFP within the framework of variations of productivity prosperity across sectors in the manufacturing industry (Kreuser and Newman 2018) and the importance of information technology in TFP convergence (Maryam and Jehan 2018). The second pertaining to FDI-centric research includes: regional income convergence and FDI (Dunne and Nicholas Masiyandima 2017); how portfolios in Africa's economic sectors are influenced by more globalized sectors (Boamah 2017); nexuses between concepts underlying equity, bonds, institutional debts and economic prosperity (Fanta and Makina 2017); modelling output gaps in view of future economic prosperity (Fedderke and Mengisteab 2017) and how value chains are relevant in boosting the influence on economic growth and TFP (Meniago and Asongu 2019).…”

Analysis Of International Capital Flows: Challenges And Prospects

“…However, these measures cannot solve the issue of inflation. Inflation expectations can be heated by constantly growing needs for public funding which can encourage an increase in differences between national and international interest rates and contribute to acceleration of the capital inflow under rigid exchange rate control (Fanta & Makina, 2014). The efficiency of capital flow control can be limited when development of financial markets reduces costs of avoidance of these measures in comparison with incentives for this avoidance conditioned by differences in exchange rates.…”