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Real Exchange Rate Undervaluation and Poverty Reduction in South Africa: Does the Nature Of Productivity Growth Matter?
Brian Tavonga Mazorodze and Harris Maduku
DOI: 10.15604/ejef.2024.12.01.001
Abstract
While an undervalued exchange rate has gained prominence in the last three decades as a correlate of economic growth and poverty alleviation, South Africa’s experience is less encouraging as the depreciation of the Rand against the United States dollar barely coincided with poverty reduction. Against this background, this paper sought to examine the impact of real exchange rate undervaluation on poverty reduction in South Africa. It also investigated how the nature of productivity growth influenced the impact of real exchange rate undervaluation on poverty reduction. Using annual time series data observed between 1995 and 2020, evidence from binary regressions and a Balassa-Samuelson adjusted undervaluation measure suggests that an undervalued exchange rate could have potentially lifted people out of poverty had it been accompanied by within-sector productivity growth of at least 2.5% annually. The South African economy fell short of this threshold level between 1995 and 2020 as annual within-sector productivity growth averaged 2.2%. Furthermore, evidence shows that South Africa went through a structural change that shifted employment in the wrong direction. Low-skilled workers appear to have moved from primary and secondary to tertiary sectors, a process that shrank overall productivity growth.
Keywords: Undervaluation, Poverty, Structural change, Productivity growth, South Africa
21-29
Impact of Oil Prices on Boursa Kuwait
Mesfer Mahdi Al Mesfer Al Ajmi
DOI: 10.15604/ejef.2024.12.01.002
Abstract
Given Kuwait’s economic dependency on oil exports, analyzing the effects of oil prices fluctuations on the emerging Boursa Kuwait is crucial. The main purpose of this study is to investigate the long-run and short-run relationships between Kuwait’s oil prices and Boursa Kuwait’s performance utilizing recent data of the premier index, which was established in 2018 After applying the stationarity tests on the daily data from 2018 to 2022, the empirical Johansen’s cointegration method revealed the absence of long-run relationship between oil prices and stock market returns when an optimal lag two of the Schwarz information criterion was used. In the short term, the autoregressive model showed that oil prices’ past lag can predict the Kuwait’s oil prices and premier index, whereas the past lag values of the premier index can predict the premier index but not oil prices. The vector autoregressive coefficients in the short-run findings is that the capital market policymakers may need to revise their financial strategies by observing Kuwait’s oil production, which affects the economy and the performance of the listed companies in Boursa Kuwait. Moreover, portfolio managers may need to revise their hedging investment policies based on the effect of oil prices.
Keywords: Oil Prices, Bourse Kuwait, Premier Index, Index Prices, Cointegration, VAR
30-44
Examining the Causal Relationship Between Official Development Assistance, Foreign Direct Investment, and Economic Growth in Selected African Countries
Vincent Muziwakhile Mbongeleni Moloi
DOI: 10.15604/ejef.2024.12.01.003
Abstract
This study focuses on the causal relationship between official development assistance (ODA), foreign direct investment (FDI), and economic growth in selected African countries. Insufficient government funding cannot support all national projects due to limited financial resources. Therefore, the lack of government funding in Africa served as a catalyst for this study. In addition, this study employed the Dumitrescu-Hurlin panel causality test to examine the causal relationship between ODA, FDI, and economic growth for the period 1980 to 2018 Using the Dumitrescu-Hurlin panel causality technique, this study revealed no causal relationship between FDI and economic growth nor between ODA and FDI. Furthermore, the study indicates a bidirectional relationship between ODA and economic growth in Africa. Due to these findings, this paper urges African countries to pay close attention to how ODA is measured as well as the importance of foreign capital inflows (ODA and FDI) in driving economic growth. In turn, this study contributes to the extensive empirical studies of the relationships between ODA, FDI, and economic growth in Africa by shedding light on how policymakers can foster more sustainable growth and stability in Africa.
Keywords: Official Development Assistance, Foreign Direct Investment, Economic Growth, Dumitrescu-Hurlin Panel Causality, Africa
45-51
Exploring Stock Market Risk Using a Generalized Breach Indicator: Evidence From International Financial Markets
Samuel Tabot Enow
DOI: 10.15604/ejef.2024.12.01.004
Abstract
Stock market risk is of significant consideration in asset management, due to its direct link with valuation. Risk in stock markets mostly arises from macro and micro policies which influence the returns of an index. However, there is no real meaningful study that has estimated the extent to which the realized returns exceed or fall short of the expected return in international stock markets. The aim of this study was to explore market risk using breach indicators in the JSE, Nasdaq, CAC 40, DAX, Nikkei 224, and BIST100 indexes. Using a sample period from January 2, 2018, to January 2, 2023, the findings revealed a significantly lower breach of expected returns in the Nasdaq, DAX, and CAC 40 while the JSE was within range. This implies a significantly larger than normal uncompensated risk involved in the Nasdaq, DAX, and CAC 40 However, the Nikkei 225 and BIST100 displayed a significant positive breach of expected returns. The findings of this study strengthen the debate that stock markets in developed countries are more susceptible to risk and losses than stock markets in less developed countries. In essence, using long-term moving averages will be useful in mitigating absurd price swings in the Nasdaq, DAX, and CAC 40
Keywords: Stock Markets, Risk, Generalized Breach Indicators, Value-at Risk, Heteroscedasticity, Total Loss
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