The Relationship between Household Debt and Consumption Spending in South Africa

Consumption has been and remains the main contributor to gross domestic product (GDP) growth in South Africa. Household debt on the other side has remained high over the years. These two economic indicators are a reflection of the well-being of an economy. This study thus examined the relationship between household debt and consumption spending, for the period between 1994 and 2013. The Johansen cointegration technique and the Vector error correction model (VECM) were utilised to test the long run and short run relationships between the variables. The Granger causality test was also employed to test the direction of causality between the variables. Results from this study have revealed that a relationship exists between household debt and consumption spending in South Africa and they have also showed that this relationship flows from household debt to consumption spending. The implications of these results are that consumption spending may be increased through other measures rather than through increasing debt. The study therefore recommends that policy makers avail more investment opportunities for households and to also create employment in a bid to increase the income of households which can then be used to increase household consumption rather than the use of debt.

Download Full-text

The Economic and Environmental Impact of Large Financial Developments in an Oil-Dependent Economy

Handbook of Research on Creating Sustainable Value in the Global Economy - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-1196-1.ch013 ◽

2020 ◽

pp. 221-240

Author(s):

Hanan Naser

Keyword(s):

Economic Growth ◽

Environmental Impact ◽

Vector Error Correction Model ◽

Policy Makers ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Market Shares ◽

Short Run ◽

The Relationship

This study examines the economic and environmental impact of large financial developments in Bahrain from year 2006 to 2016. To do so, the relationship between energy consumption, oil prices, market shares, dividend yields, and economic growth has been investigated using Vector Error Correction Model (VECM). The key findings are summarized as follow: (1) Long run relationship exists between the suggested variables. (2) Both energy and financial markets are significant in the long run relationship, and positively affect the economic growth of Bahrain. (3) According to the estimated ECM term, the model is stable in the short run. (4) Decline in oil price has negative significant drawback on the economic growth of Bahrain. Accordingly, it is recommended that policy makers in Bahrain focuses on implement strong strategies that aim at encouraging investments in non-oil sectors without impeding energy sector or economic growth in order to move towards sustainability.

Download Full-text

Determinants of Household Debt in Botswana: 1994-2012

Journal of Economics and Public Finance ◽

10.22158/jepf.v1n1p14 ◽

2015 ◽

Vol 1 (1) ◽

pp. 14 ◽

Cited By ~ 1

Author(s):

Faith M. Zimunya ◽

Mpho Raboloko

Keyword(s):

Interest Rates ◽

Money Supply ◽

Gdp Per Capita ◽

Household Debt ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Per Capita ◽

The Relationship

The paper identifies the factors that are influential in determining the growth of household debt in Botswana. Understanding the relationship between household debt and other economic indicators is an important step towards formulating focused and effective policies that control the effects of household debt on the whole economy. Using quarterly data from the first quarter of 1994 to the second quarter of 2012, the paper employs the Vector Error Correction Model (VECM) to analyse the influence of Gross Domestic Product (GDP) per capita, interest rates, inflation, household consumption and money supply on household debt. The findings indicate that GDP per capita, interest rates and money supply determine changes in household debt in the long-run. Further analysis shows that lagged household debt, interest rates and money supply influence changes in household debt in the short-run.

Download Full-text

Inflation, Unemployment and NAIRU Estimate in Indonesia: Phillips Curve Approach

Economic Analysis ◽

10.28934/ea.18.51.34.pp24-32 ◽

2018 ◽

Vol 51 (3-4) ◽

pp. 24-32

Author(s):

Nurul Hafnati ◽

Sofyan Syahnur

Keyword(s):

Phillips Curve ◽

Wald Test ◽

Analysis Model ◽

Causality Test ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

The Relationship

The present study was carried out to analyze the relationship between inflation and unemployment in NAIRU estimate in Indonesia through Phillips curve approach during 25 years data from 1991-2016. The analysis model used in this research was Vector Error Correction Model (VECM) as attempts to determine the long run and short run relationships between inflation and unemployment matters in Indonesia. The results of Granger causality test indicated two-way relationship between inflation and unemployment in Indonesia. The formulated results on long run estimate pointed out that unemployment delivered negative and significant effects on inflation. Nonetheless, Wald Test designated that there was a short run relationship between inflation and unemployment

Download Full-text

An Econometric Analysis of Inflation and Unemployment in Lebanon: A Vector Error Correction Model (VECM)

International Journal of Economics and Finance ◽

10.5539/ijef.v10n2p133 ◽

2018 ◽

Vol 10 (2) ◽

pp. 133

Author(s):

Mohammad Khanssa ◽

Wafaa Nasser ◽

Abbas Mourad

Keyword(s):

Phillips Curve ◽

Vector Error Correction Model ◽

Econometric Modeling ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Causality Relationship ◽

The Relationship

This paper uses econometric modeling to test the nature of the relationship between unemployment and inflation in Lebanon throughout the period 1993-2014. It takes the Phillips curve relationship as a reference for the tests. Cointegration, Granger causality and VECM were used to test the relationship both in the short and in the long run. The study resulted in finding out that the Phillips curve relationship doesn’t hold in Lebanon in the short run and came to a conclusion that there is a one-way causality relationship in the long run from unemployment to inflation and not in the opposite direction.

Download Full-text

THE CAUSAL RELATIONSHIP BETWEEN INSURANCE AND ECONOMIC GROWTH IN NIGERIA (1986-2010)

Australian Journal of Business and Management Research ◽

10.52283/nswrca.ajbmr.20120212a07 ◽

2012 ◽

Vol 02 (12) ◽

pp. 49-57

Author(s):

TAIWO AKINLO

Keyword(s):

Economic Growth ◽

Interest Rate ◽

Causal Relationship ◽

Causality Test ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run

This study examined the causal relationship between insurance and economic growth in Nigeria over the period 1986-2010. The Vector Error Correction model (VECM) was adopted. The cointegration test shows that GDP, premium, inflation and interest rate are cointegrated when GDP is the edogeneous variable. The granger causality test reveals that there is no causality between economic growth and premium in short run while premum, inflation and interest rate Granger cause GDP in the long run which means there is unidirectional causality running from premium, inflation and interest rate to GDP. This means insurance contributes to economic growth in Nigeria as they provide the necessary long-term fund for investment and absolving risks.

Download Full-text

Assessing Financial Integration of BRICS Equity Markets: An Empirical Analysis

Emerging Economy Studies ◽

10.1177/2394901517730734 ◽

2017 ◽

Vol 3 (2) ◽

pp. 127-138 ◽

Cited By ~ 4

Author(s):

J. Vineesh Prakash ◽

D. K. Nauriyal ◽

Sandeep Kaur

Keyword(s):

South Africa ◽

Granger Causality ◽

Financial Integration ◽

Equity Markets ◽

Granger Causality Test ◽

Causality Test ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Johansen Cointegration Test

This article examines the degree of financial integration among the equity markets of Brazil, Russia, India, China, and South Africa (BRICS) by using monthly data collected for the period 2005–2014. The study employs Johansen cointegration test, vector error correction model (VECM), and Granger causality test which confirm the existence of relationship in the short and long run among the equity markets of BRICS. Further results exhibit that there exists cointegration or a long-run relationship among the equity markets, but weak cointegration, though the results of Granger causality test do not display existence of any causality among market pairs such as China–Brazil, Russia–Brazil, South Africa–Brazil, Russia–China, and South Africa–India. The results indicate that even though the financial integration among the equity markets of BRICS is on ascendance, it is yet incomplete. This work suggests harmonization of laws, regulations, and operations based on international principles and appropriate regulatory supervision among BRICS nations in order to minimize the risk of financial integration, besides further relaxing restrictions on capital account for expedited financial integration.

Download Full-text

The Relationship between Coal Consumption and Economic Growth in Indonesia

European Journal of Engineering and Formal Sciences ◽

10.26417/ejef.v2i1.p12-19 ◽

2018 ◽

Vol 2 (1) ◽

pp. 12

Author(s):

Irwandi Irwandi

Keyword(s):

Economic Growth ◽

Control Variable ◽

Coal Consumption ◽

Causality Test ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Export Tax ◽

The Relationship

Indonesia is one of the largest coal producer countries in the world. In the previous research, it is stated that coal producer countries are able to affect economic growth. The purpose of the study is to investigate the co-integration and causal relationships between coal consumption and income in Indonesia for the period of 1965-2016 using Granger causality test based on Vector Error Correction Model (VECM) employing population as the control variable in bivariate system. The Augmented Dicky-Fuller (ADF) and Phillips-Perron (PP) tests were used to determine the variable stationarity. From Johansen’s co-integration tests, it is indicated that there is a long-run relationship between the variables. The empirical study shows that there is no causal relationship between coal consumption and economic growth in Indonesia since coal consumption in fact cannot affect economic growth in Indonesia. Export tax becomes government revenues earned from energy sectors including coal.

Download Full-text

REVISITING KEYNES’ INVESTMENT AND SAVING MODEL IN INDONESIA

Economic Review ◽

10.51558/2303-680x.2020.18.2.45 ◽

2020 ◽

Vol XVIII (2) ◽

pp. 45-58

Keyword(s):

Error Correction ◽

Causal Relationship ◽

Granger Causality Test ◽

Vector Error Correction Model ◽

Causality Test ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run

This study aims to analyze the Keynes’ investment and saving model in Indonesia from 1981 to 2018. The researchers use the econometric test from the Granger causality test to find the short-run causal relationship and the Vector Error Correction Model to reveal both the short-run and long-run effects in the model. The result of Granger causality test demonstrates that there is no short-run causal relationship between these two variables. In the short-run, the increase in saving affects the consumption loans more compared to the investment loans. Besides, increased consumption compared to saving has more influence in raising investment. However, the Vector Error Correction Model proves that saving negatively affects investment in the long-run. This model empirically supports the long-run Keynes’ investment and saving model. Consequently, the Indonesian government needs to consider saving as a policy instrument to increase investment in the longrun.

Download Full-text

Threshold Cointegration and Nonlinear Causality test between Inflation Rate and Repo Rate

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v9i3(j).1755 ◽

2017 ◽

Vol 9 (3(J)) ◽

pp. 163-170

Author(s):

Katleho Makatjane ◽

Ntebogang Moroke ◽

Diteboho Xaba

Keyword(s):

South Africa ◽

Inflation Rate ◽

Test Statistic ◽

Causality Test ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Inflation Rates ◽

Target Period ◽

Repo Rate

The current study investigated a cointegration and nonlinear causality relationships between inflation and repo rates of South Africa using the data spanning the period of January 2002 to March 2016. We used a threshold vector error correction model (TVECM) and nonlinear Granger frameworks causality to carry out the analysis. Preliminary analysis of data revealed the expected properties of the data such as nonlinearity, non-stationarity and co-movement of the variables. The two variables confirmed to be moving together in the long-run according to the observed supWald test statistic. Finally, the Diks-Panchenko nonlinear Causality test revealed a strong bidirectional nonlinear causal relationship between repo rate and inflation rate. The results imply that the use of repo rate to target the inflation rate during the target period did not address the financial problem in South Africa. Consequently, the study concluded that repo rate may not be a good measure to use for controlling inflation rates of South Africa.

Download Full-text