Dissertations / Theses on the topic 'Forecast error variance decomposition'

Seminal papers of Solow (1957) and Swan (1956) stimulated debate among economists on the role of technical change in productivity improvements and for that matter economic growth. The consensus is that technological change accounts for a significant proportion of gross national product (GNP) growth in industrialised economies. In the case of Australia, the aggregate productivity performance was poor in the 1970s and 1980s, but picked up very strongly by the 1990s, and was above the OECD average growth level for the first time in its productivity growth history. However, this high productivity growth rate could not be sustained and Australia started to experience a slowdown in productivity growth since 2000. This study empirically measures the performance of productivity in Australia’s economy for the period 1950-2005, using an econometric approach. Time-series data are used to develop econometric models that capture the dynamic interactions between GDP, fixed capital, labour units, human capital, foreign direct investment (FDI) and information and communication technology (ICT). The Johansen (1988) cointegration techniques are used to establish a long-run steady-state relation between or among economic time series. The econometric analysis pays careful attention to the time-series properties of the data by conducting unit root and conintegration tests for the variables in the system.This study finds that Australia experienced productivity growth in the 1950s, a slow down in the mid 1960s, a very strong productivity growth in the mid 1990s and another slowdown from 2000 onwards. The study finds evidence that human capital, FDI and ICT are very strong determinants of long-run GDP and productivity growth in Australia. The study finds that the three, four and the five factor models are likely to give better measures of productivity performance in Australia as these models recognise human capital, FDI and ICT and include them as separate factors in the production function, This study finds evidence that the previous studies on the Australia’s productivity puzzle have made a very significant omission by not considering human capital, FDI and ICT as additional exogenous variables and by excluding them from the production function for productivity analysis.

It is now well established in the literature that oil consumption, oil price shocks, and oil price volatility may impact the economic activities negatively. Studies identifying the relationship between energy and/or oil consumption and output primarily take two different approaches. One approach includes energy or oil consumption in addition to output, labour, and capital. The other approach takes energy and/or oil, output and prices. Based on these two models most of the previous studies suggest energy conservation policies for different economies. However, none of the previous studies considered both of these models jointly to make policy implications and there are not many studies investigating oil consumption-output relationship in a multivariate model in the context of developing economies. Furthermore, one of the important variables in making any conservation policies, carbon emission, is omitted from the models.Similarly, there has been a large body of literature investigating the impact of oil price shocks in different economies. Nevertheless, studies analysing the impact of oil price volatility on economic activities are very limited. More importantly, studies analysing the impact of oil price volatility in developing economies are almost non-existent. In the light of increasing demand for oil from the developing nations, comprehensive studies on identifying the impact of oil consumption, oil prices, and oil price volatility on developing economies is warranted.Hence, in this thesis, the contribution of oil in economic development is investigated with the help of two different models. The first model, termed as supply-side approach, analyses the contribution of oil consumption in economic activities within the traditional production function framework. The second model, termed as demand-side approach, analyses the contribution of energy consumption in economic activities in two stages. In the first stage, oil consumption demand is analysed by a tri-variate model having oil prices as the third variable in addition to oil consumption and GDP. In the second stage, carbon emission output is determined in a tri-variate model with carbon emission as the third variable along with oil consumption and output. This thesis also performs a unique task of analysing the impact of volatility on world crude oil prices on the economic activities of six Asian developing economies.With respect to the oil consumption-output relationship, despite dissimilarities in results for causality relationships between oil consumption and output in three different models for different countries, one common result emerges. Except for the Philippines, all other countries are found to be oil dependent either from supply-side or from demand-side or from both of the sides. This implies that for all the considered developing economies, except for the Philippines, oil conservation policies seem to be harder to implement as that may retard their economic growth. In addition to that, one very important findings of the empirical analysis based on the equation regarding pollutant emission output is that for all the countries, except for Malaysia, output Granger causes pollutant emission (CO2) both in the short run and long run.With respect to the impact of oil price volatility on economies, this study finds that oil price volatility seems to impact all the economies in the short run. According to the results, oil price volatility affects GDP growth in China and Malaysia, GDP growth and inflation in India and Indonesia, while in the Philippines volatility in oil prices impacts inflation. However, in Thailand the impact channels are different for pre- and post-Asian financial crisis period. For Thailand, it can be inferred that oil price volatility impacts output growth for the whole period; however, after the Asian financial crisis the impact seems to disappear.Based on the comprehensive study within three different theoretical frameworks the policy implications regarding oil consumption-output relationship can be summarised as follows. For the Philippines, where uni-directional causality from income to oil consumption is found, she may contribute to the fight against global warming directly implementing energy conservation measures. The direction of causality indicates that the oil conservation policies can be initiated with little or no effect on economic growth. For rest of the oil dependent countries where either bidirectional causality or uni-directional causality from oil consumption to output is found in any of the models, since oil is a critical determinant of economic growth in these countries, limiting its use may retard economic growth. Nevertheless, all of these countries may initiate environmental policies aimed at decreasing energy intensity, increasing energy efficiency, and developing a market for emission trading. These countries can invest in research and development to innovate technology that makes alternative energy sources more feasible, thus mitigating pressure on the environment.According to the impact analysis of oil price volatility on economic activities, the policy implications are as follows. In Thailand, the results after the financial crisis show that adverse effect of oil price volatility has been mitigated to some extent. It seems that oil subsidization of the Thai government by introduction of the oil fund and the flexible exchange rate regime plays a significant role in improving economic performance by lessening the adverse effect of oil price volatility on macroeconomic indicators. For all other countries, the impact of oil price volatility is also of short term. Hence, the short-term impact of oil price volatility on the concerned economies may be exerted though the uncertainty born by the fluctuations in the crude oil price in the world market. As far as the impact on GDP growth is concerned, the short-run impact may also be transmitted through the investment uncertainties resulting from increased volatility in oil prices. However, from the Thai experience it can be inferred that flexible exchange rate regime insulate the economy in the short run from any adverse impact from oil price volatility on growth. Hence, it can be suggested that good subsidization policy with considerable knowledge on international currency market, both spot and future, may shield the economies from adverse consequences due to the fluctuation in oil prices in the short run. Nevertheless, this may affect other sectors of the economy like, inflation, interest rate, government budget deficit, etc.

Seminal papers of Solow (1957) and Swan (1956) stimulated debate among economists on the role of technical change in productivity improvements and for that matter economic growth. The consensus is that technological change accounts for a significant proportion of gross national product (GNP) growth in industrialised economies. In the case of Australia, the aggregate productivity performance was poor in the 1970s and 1980s, but picked up very strongly by the 1990s, and was above the OECD average growth level for the first time in its productivity growth history. However, this high productivity growth rate could not be sustained and Australia started to experience a slowdown in productivity growth since 2000. This study empirically measures the performance of productivity in Australia’s economy for the period 1950-2005, using an econometric approach. Time-series data are used to develop econometric models that capture the dynamic interactions between GDP, fixed capital, labour units, human capital, foreign direct investment (FDI) and information and communication technology (ICT). The Johansen (1988) cointegration techniques are used to establish a long-run steady-state relation between or among economic time series. The econometric analysis pays careful attention to the time-series properties of the data by conducting unit root and conintegration tests for the variables in the system.
This study finds that Australia experienced productivity growth in the 1950s, a slow down in the mid 1960s, a very strong productivity growth in the mid 1990s and another slowdown from 2000 onwards. The study finds evidence that human capital, FDI and ICT are very strong determinants of long-run GDP and productivity growth in Australia. The study finds that the three, four and the five factor models are likely to give better measures of productivity performance in Australia as these models recognise human capital, FDI and ICT and include them as separate factors in the production function, This study finds evidence that the previous studies on the Australia’s productivity puzzle have made a very significant omission by not considering human capital, FDI and ICT as additional exogenous variables and by excluding them from the production function for productivity analysis.

This thesis applies rearrangement and optimal mass transfer theory to weather forecast error decomposition. Errors in weather forecasting are often due to displacement of key features; conventional error scores do not necessarily favour good forecasts, nor are they descriptive of how the forecast failed. We study forecast error decomposition, where error is split into an error due to displacement and an error due to differences in qualitative features. In its simple formulation, we seek re-arrangements of the forecast which are a best fit to the actual data, and then find the “least kinetic energy” of a notional velocity transporting the forecast to a best fit. In mathematical terms, we are characterising those elements of a set of rearrangements which are closest (in the sense of L2) to a prescribed square integrable function, and seeking the least 2-Wasserstein distance squared between the forecast and the closest displaced forecasts. We demonstrate that there are closest rearrangements, and characterise this set; the best fitting rearrangements are determined up to rearrangement on the level sets of positive size of the prescribed function. Displacement error is calculated by finding the minimum value of an optimal mass transfer problem; we review previous work, demonstrating the connection with transport of the forecast to the best fit. A problem with the simple formulation of forecast error decomposition is that because the qualitative features error is taken first, an error in qualitative features may be penalise as a large displacement error. We conclude this thesis by considering a formulation which minimises both errors simultaneously.

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior
Globalization provoked in financial markets by means stock exchanges an interchange among the markets over the world. The aim of this study was to examine the relationship of the ten major main economic index of the world represented in New York (DJIA, S&P500 e Nasdaq), Tokyo (NIKKEI 225), London (FSTE 100), São Paulo (IBOV), Shanghai (SSE180), Paris (CAC-40), Frankfurt (DAX-30) and Buenos Aires (Merval) and looking for its co-integration, to demonstrate the behavior of these indexes and the long run equilibrium, from January of 2010 to March of 2011. To investigate the equilibrium and the long rum behavior the error correction model was used jointly with co-integration test and impulse response based on Cholesky decomposition. The results of this study show that the index of stock markets has long term equilibrium, and American markets, Argentina and English showed a strong influence over other markets. With this research we can infer that a relationship exists between the stock markets under study, confirming that the economy in a country can influence the others. In this sense, the contribution of this study, given this range of discussions involving the interconnection of economies with respect to trades made on the stock exchanges, was to show the relationships and influences in the world.
A internacionalização somada à abertura dos mercados financeiros transformou as economias antes fechadas em economias abertas, provocou um intercâmbio entre as economias mundiais por meio das bolsas de valores. O objetivo deste estudo é examinar a relação entre os dez principais índices econômicos do mundo, sendo eles: Nova York (DJIA, S&P500 e Nasdaq), Tóquio (Nikkei 225), Londres (FSTE 100), São Paulo (IBOV), Shangai (SSE180), Paris (CAC), Frankfurt (DAX-30) e Bueno Aires (Merval), por meio da análise de co-integrações para demonstrar o comportamento desses índices e seus equilíbrios no período de janeiro de 2010 a março de 2011. Para investigar e verificar o comportamento em longo prazo, foi utilizado o modelo de correção de erros e teste de impulso-resposta baseado na decomposição de Cholesky. Os resultados deste estudo mostram que existe equilíbrio em longo prazo entre os índices do mercado de ações. Os mercados americano, argentino e inglês mostraram forte influência sobre os demais mercados. Com esta pesquisa, verifica-se que existe uma relação entre os mercados de ações estudados, confirmando que a economia de um país influencia as demais. A contribuição deste estudo é verificar a assertiva das discussões atuais sobre a dependência das economias mundiais com as negociações por meio da bolsa de valores.

Abstract of thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management Dynamics of macroeconomic variables in Fiji : a cointegrated VAR analysis By Shiu Raj Singh The objective of this study is to examine how macroeconomic variables of Fiji inter-relate with aggregate demand and co-determine one another using a vector autoregression (VAR) approach. This study did not use a prior theoretical framework but instead used economic justification for selection of variables. It was found that fiscal policy, which is generally used as a stabilisation tool, did not have a positive effect on real Gross Domestic Product (GDP) growth in the short term. Effects on GDP growth were positive over the long term but not statistically significant. Furthermore, expansionary fiscal policy caused inflationary pressures. Fiji has a fixed exchange rate regime, therefore, it was expected that the focus of monetary policy would be the maintenance of foreign reserves. It was, however, found that monetary expansion in the short term resulted in positive effects on real GDP growth and resulted in inflation. The long term effects of monetary policy on real GDP growth were negative, which are explained by the fixed exchange rate regime, endogenous determination of money supply by the central bank, an unsophisticated financial market and, perhaps, an incomplete transmission of the policy. Both merchandise trade and visitor arrivals growth were found to positively contribute to short term and long term economic growth. Political instability was found not to have significant direct effects on real GDP growth but caused a significant decline in visitor arrivals which then negatively affected economic growth in the short term.

This dissertation examines the interaction between European Emerging markets including cointegration, volatility, correlation and spillover effects. This study is also concerned with the process of the enlargement of the European Union and how this affects the emerging markets of newcomers. The twelve emerging markets studied are Bulgaria, the Czech Republic, Cyprus, Estonia, Hungry, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia, which are all progressing very rapidly in their reforms and domestic economic stability. The majority of prior studies on stock market comovements and integration have concentrated on mature developed markets or the advanced emerging markets of the Czech Republic, Hungary and Poland whilst the behaviour and interrelationship of other Central and Eastern European equity markets has been neglected. This study fills that gap. There are two key aspects investigated in this study. Firstly the cointegration between studied emerging markets and secondly the volatility and spillover effects. The cointegration analysis examines the short and long run behaviour of the twelve emerging stock markets and assesses the impact of the EU on stock market linkages as revealed by the time series behaviour of their stock market indices. The adopted time- series framework incorporates the Johansen procedure, Granger Causality tests, Variance Decompositions and Impulse Response analyses. The cointegration results for both pre- and post- EU periods confirm the existence of long run relationships between markets. Granger Causality relationships are indentified among the most advanced emerging markets. The Variance Decomposition analyses find evidence of regional integration amongst the markets. Furthermore, the Impulse Response function illustrates that the shocks in returns for all twelve markets persist for very short time periods. The volatility and spillover analysis applies several univariate models of Autoregressive Conditional Heteroscedasticity, including GARCH, GJR and EGARCH. The models used in the analysis of cross market effects include CCC, diagonal BEKK, VARMA GARCH and VARMA AGARCH. Overall, the econometric analysis using these models shows stock market integration during the pre-EU period, however interdependence of the markets is established for the post-EU period. The results provide important information on the impact of the accession of new countries to the EU, with clear evidence of stability in Central and Eastern Europe markets and integration within the region. This study has important implications for investors wishing to diversify across national markets, such as the implications of growing asset correlations, if they are displayed, and whether investors should diversify outside the Central and Eastern European countries. It could be argued that the former Eastern block economies constitute emerging markets which typically offer attractive risk adjusted returns for international investors. Moreover, stock market comovement is of considerable interest to policy makers from a perspective of the effects on the macroeconomy, the planning of monetary policy and impact of the degree of stock market comovements on the stability of international monetary policy.

This research examines the impact of external shocks on Nigeria’s output performance for the period 1981 – 2015. It aims to bring to the fore the importance of considering external shocks during policy design and implementation. The multivariate VAR and VECM frameworks were used to evaluate the impact of the shock variables on Nigeria’s output performance and to achieve the stated objectives. Findings show that the external shock and domestic policy variables have short-run effects on Nigeria’s output performance. Also, all the measures of external shocks and domestic policies display some viable information in explaining the variabilities in Nigeria’s output performance over the horizon. The comparison between the results of the VECM and the unrestricted VAR shows that the unrestricted VAR model outperformed the VECM. The overall result of the study confirms the view about the vulnerability of the Nigerian economy to external shocks. These shocks explain more than half of the variance in real output performance and have varying effects on output performance in Nigeria. The dynamic response of output performance to each of the defined shock variables show that output performance responds rapidly to the shock variables, while its response to the domestic economic variables is seemingly moderate. Finally, the variance decomposition show that international crude oil price and terms of trade have the largest share in accounting for the variability in output performance, followed closely by the shares of capital inflows and monetary policy.

JEL Classification: E32, E37
This dissertation aims to analyze the dynamics of business cycles across European countries between 1960Q1 and 2016Q1. For such purpose we identify country-groups of national deviation cycles through Hierarchical Agglomerative Clustering with the Ward’s method. The clustering technique suggests the existence of three country-groups, which include, aside from other countries, France and Spain in Cluster 1, United Kingdom and Denmark in Cluster 2 and Germany and Italy in Cluster 3. We execute an extensive analysis on business cycle stylized facts, synchronization and turning points detection over the clusters’ deviation cycles. Further on, we analyze the propagation of economic shocks through a VAR model, over which we study Granger-causalities, Impulse Response Functions and Forecast Error Variance Decomposition. Our results show that both Cluster 1 and Cluster 2 share similar cyclical characteristics when compared to Cluster 3. Nevertheless, Cluster 1 and Cluster 3 appear to be the most synchronous pair, and simultaneously verify the largest proportion of time spent in the same cyclical phase. We show that there has been an increasing business cycle synchronization in Europe since the beginning of the 90’s. The structural analysis shows that Cluster 1 and Cluster 2 have the strongest permanent cumulative shocks, whereas Cluster 3 induces not only the weakest impulses but also explains the smallest fraction of the counterparts’ forecast error variance decomposition. These conclusions question the "German Dominance" hypothesis and allow the identification of alternative major economic propellers in Europe.
A presente tese pretende analisar as dinâmicas dos ciclos económicos na Europa no período compreendido entre 1960Q1 e 2016Q1. Como tal, procedemos à identificação de grupos de ciclos económicos nacionais através de Clusterização Hierárquica Aglomerativa com o método de Ward. A Clusterização sugere a existência de três grupos que incluem, além de outros países, França e Espanha no Cluster 1, Reino Unido e Dinamarca no Cluster 2, e Alemanha e Itália no Cluster 3. Analisamos as principais características, sincronização e cronologia de pontos de inflexão dos ciclos económicos dos clusters. Estudamos ainda a propagação de choques económicos com um modelo VAR, sobre o qual concluímos sobre causalidade à Granger, funções de impulso-resposta e decomposição de variância. Os resultados mostram que o Cluster 1 e Cluster 2 apresentam maiores semelhanças nas características dos seus ciclos quando comparados ao Cluster 3. Simultaneamente, o Cluster 1 e Cluster 3 apresentam quer o maior nível de sincronização quer a maior fração de tempo partilhada na mesma fase cíclica. Concluímos também que o nível de sincronização dos ciclos económicos na Europa apresenta uma tendência crescente, especialmente após os anos 90. A análise estrutural conclui que o Cluster 1 e Cluster 2 produzem os choques permanentes mais fortes, enquanto que o Cluster 3 induz os impulsos mais fracos, além de explicar a menor parte da decomposição de variância do erro de previsão dos restantes. As presentes conclusões questionam a hipótese de "Domínio Alemão" e permitem a identificação de outros propulsores económicos na Europa.

This dissertation consists of three essays wherein tools of financial econometrics are used to study the three aspects of farmland valuation puzzle: short-term boom-bust cycles, overpricing of farmland, and inconclusive effects of direct government payments. Essay I addresses the causes of unexplained short-term boom-bust cycles in farmland values in a dynamic land pricing model (DLPM). The analysis finds that gross return rate of farmland asset decreases as the farmland asset level increases, and that the diminishing return function of farmland asset contributes to the boom-bust cycles in farmland values. Furthermore, it is mathematically proved that land values are potentially unstable under diminishing return functions. We also find that intertemporal elasticity of substitution, risk aversion, and transaction costs are important determinants of farmland asset values. Essay II examines the apparent overpricing of farmland by decomposing the forecast error variance of farmland prices into forward looking and backward looking components. The analysis finds that in the short run, the forward looking Capital Asset Pricing Model (CAPM) portion of the forecast errors are significantly higher in a boom or bust stage than in a stable stage. This shows that the farmland market absorbs economic information in a discriminative manner according to the stability of the market, and the market (and actors therein) responds to new information gradually as suggested by the theory. This helps to explain the overpricing of farmland, but this explanation works primarily in the short run. Finally, essay III investigates the duel effects of direct government payments and climate change on farmland values. This study uses a smooth coefficient semi-parametric panel data model. The analysis finds that land valuation is affected by climate change and government payments, both through discounted revenues and through effects on the risk aversion of land owners. This essay shows that including heterogeneous risk aversion is an efficient way to mitigate the impacts of misspecifications in a DLPM, and that precipitation is a good explanatory variable. In particular, precipitation affects land values in a bimodal manner, indicating that farmland prices could have multiple peaks in precipitation due to adaption through crop selection and technology alternation.

Internship Report presented as the partial requirement for obtaining a Master's degree in Data Science and Advanced Analytics
Demand forecasting for a retail company in luxury fashion is a challenging process due to the highly complex and demanding customer profile. As the company keep growing, more and more partners are demanding the expected volume of orders for better operational capacity planning and to justify the return of their investment. This project aims to create an automatic and scalable forecasting process to ensure customer experience and partnership profitability. By studying decomposition time series forecasting taking in consideration the customer behavior, a machine learning process can be applied for parameters tuning depending on customer clusters based on geolocation and marketing events. The proposed process has shown forecast accuracy number up to 90% for non-sale season and 84% for sale season periods, reducing the forecasting time in 88% versus the previous forecast process and increasing the partner coverage from 20% to 100%. Acknowledging that this forecast process is a continuous learning process, the foundation of a robust supply chain planning was created building trust in the organization and adding value to the partners.

The 2007-2008 US subprime mortgage crisis evolved into a financial crisis that negatively affected many economies in the world and therefore it was widely referred to as the global financial crisis. Since the beginning of this financial crisis of 2008-2009, South Africa experienced a significant increase in its household debt to income ratio. In the main, the aim of this dissertation is to investigate the prominent factors contributing to the rise in the level of household debt in South Africa. Also, we study the response of household debt to various shocks originating from the aforementioned crisis. Additionally, in the context of our timeline (1985 Q1-2012 Q1) we will extrapolate possible graphical trends in the rise and fall of household indebtedness in South Africa associated with various crises. Working from past research papers and a theoretical framework developed by Franco Modigliani and Milton Friedman, seven macroeconomic variables will be considered to examine the rise of household borrowing to income namely; the real house price index, consumer price index. real income, real prime rate, real household consumption expenditure, real gross domestic product and real household savings. Both a long-run cointegration analysis and a short-run error correction model will be used to evaluate the relationship between household debt and the chosen variables by estimating a Vector Error Correction Model. Furthermore, the Variance Decomposition and the Generalized Impulse Response Function will be utilized to assess the impact of household debt to various shocks emanating from the 2008-2009 financial crisis. The different models and tests conducted in this research will be executed using the statistical software package EVIEWS 7. Based on the results, household debt was seen to have been fairly affected by the 2008-2009 financial crisis. The cointegration analysis maintains that in the long run, household borrowing is positively and significantly determined by consumer price index and real household consumption. In addition, it confirms that household borrowing is negatively affected by real household income and real GOP. The rest of the variables were found insignificant. Nevertheless, the short run error correction model reveals that about 3.6% of the disequilibrium will be corrected each quarter for the equilibrium state to be restored. Also, the Variance Decomposition results confirmed that the South African household debt is mostly affected by shocks from real house price index, real household income, real household consumption and real household savings, respectively. Furthermore, the Generalized Impulse Response Function results established the significant positive response of household debt to a shock from real house price index and real household consumption. The response of debt to shocks from consumer price index, real household savings and real income is negative and this outcome is confirmed by the theory. However, the response of debt shows fluctuating behaviours to shocks from LRIN, LRPR and LRGDP over the estimated period. In conclusion, our econometric investigation highlighted the main causes of the high levels of household debt in South Africa both in the short and long run. The Generalized Impulse Response Functions confirm that shocks like the occurrence of the 2007-2008 financial crisis will have a significant impact on real house price index, consumer price index, real household consumption and real household savings. The Engle granger results show that there exist no significant relationship between household debt and unemployment in South Africa over the period 1980 to 2010. However, we propose that this result may have been significant if quarterly unemployment data was available and included in the main data set. Finally, based on the stability, validity and reliability of our model, we recommend its use to facilitate policy analysis and decision making regarding household debt levels in South Africa.
Thesis (M.Com.( Economics) North-West University, Mafikeng Campus, 2012

碩士
僑光科技大學
企業管理研究所
100
This research is to explore the Greek debt crisis to the causal relationship change between the exchange rate, the gold price, the oil price, the interest rate and the price level, and to study the forcast error variance decomposition of the impulse response. After the Chow forecast test, the partition cointegration test and VECM model and VAR model, we find: From January, 2001 to November, 2009, the cointegration relationship between the exchange rate, the gold price, the oil price and the interest rate,the price level. From December, 2009 to November, 2011, the cointegration relationship between the exchange rate, the gold price, the oil price and the interest rate and the price level don’t exist. The Greek debt crisis enables the exchange rate no longer to affect the price level, instead it is influenced by the interest rate. The gold price doesn’t longer be affected by the oil price and price level, instead it is influenced by the interest rate. The oil price no longer affects the exchange rate, the gold price and the interest rate, instead it will be influenced by interest rate. The interest rate doesn’t longer be affected by the oil price, but it affects the exchange rate, gold price and oil price. The price level no longer affects the gold price, and it will not be affect by other variables. As for the Greek debt crisis creates the non-anticipated impact variation of the exchanger rate will cause the explanatory ability of oil price, the interest rate and price level raising , the explanatory ability of the exchange rate and the gold price declining. And for the non-anticipated impact variation of the gold price, the explanatory ability of the exchange rate, the oil price, the interest rate and the price level will raise, the explanatory ability of the gold price weaken. And for the non-anticipated impact variation of the oil price, the explanatory ability of the exchange rate, the interest rate and price level will raise, the explanatory ability of the gold price weaken, and the first falling then rising for the explanatory ability of the oil price. And for the non-anticipated impact variation of the interest rate, the explanatory ability of the exchange rate, the oil price will raise, the explanatory ability of the gold price, interest rate and the price level weaken. And for the non-anticipated impact variation of the price level, the explanatory ability of the exchange rate, the gold price the oil price and interest rate will raise, the explanatory ability of the price level weaken.

The worldwide economic downturn and recession in the second half of 2008 were mainly the result of the crises that influenced the world‟s financial markets. After the financial crisis, the extended period of rapid credit growth that was driven by asset price increases, especially property prices, came to an end. This identified two problems central to the theme of this study. The first problem was illustrated through the recent crisis, which showed that problems in the financial sector have a potentially destabilising effect on the economy, to such an extent that they also affect the real economy. The second problem highlighted by the recent financial crisis pertains to the current macroeconomic framework, which indicates policy failure to detect and deal with financial sector instabilities. The objective of this study was to develop a framework in which the influence that rapidly growing credit and asset prices have on financial stability could be determined. Two distinct empirical models were estimated in order to reach the main objective of this study. The first model established the influence that asset prices and credit growth have on the real economy. It concluded that a long-run relationship exists between inflation, real GDP, credit extended to the private sector, house prices and share prices. A bi-directional relationship was found between house and share price, which indicates the interdependence of asset prices in SA. The transmission channels assume that credit is influenced by interest rates, but the results also found that interest rates are largely influenced by credit. The second model determined the influence of asset prices and credit on financial stability. A significant long-run relationship was found between financial stability, share and house prices, and between share prices, credit and financial stability. It was found that credit and share prices can be used to signal financial instability, and share prices can help to determine future credit extended to the private sector. In addition, the empirical analysis indicated that a credit market squeeze will be experienced after a decrease in financial stability. Lastly, credit extended will increase as a result of shock to house and share prices and financial stability will decrease when there is a shock to share and house prices.
MCom (Economics), North-West University, Potchefstroom Campus, 2013

A number of developing countries have been on a quest to attract foreign direct investment (FDI) with the intention of increasing capital inflow through technological spillovers and transfer of managerial skills. FDI can increase economic growth and development of a country by creating employment, and by doing so, increasing economic activity that will lead to economic growth. South Africa is one of the economies that strive to attract more FDI inflows into the country to be able to improve its economy, and the country has adopted policies that drive the motive to attract FDI inflows. This study investigated the effect of FDI on sectoral growth over the period 1970–2014. The purpose was to find out where in the three key sectors of South Africa FDI is more significant. The review of theoretical and empirical literature on FDI revealed that FDI has a diverse effect on economic growth, both in developed and developing countries. Theoretical literature analysed the behaviour of multinational firms and the motive behind multinationals investing in foreign countries. According to Dunning (1993), firms have four motives to decide to produce abroad, namely natural resource-seeking, market-seeking, efficiency-seeking and strategic asset-seeking. Empirical studies on sectors show that FDI inflows affect different sectors in different ways, and that the agricultural sector does not usually gain from FDI inflows, whereas subsectors in the industry and services sector grow from receiving FDI inflows. Sectoral analysis revealed that the services sector receives more FDI inflows, when compared to the agriculture and industry sector. The study followed an econometric analysis technique to test the effect of FDI inflows on the agriculture, industry and services sectors. The augmented Dickey–Fuller and Phillips–Perron tests were used to test for unit root. Both tests revealed that variables were not stationary at level, but that they become stationary at first difference. Vector autoregressive (VAR) models were estimated, and four types of diagnostic tests were performed on them to check the fitness of the models. The tests showed that residuals of the estimated VARs were robust and well behaved. The Johansen cointegration test suggested there is cointegration and that there is a long-run relationship between variables. Following the existence of cointegration, the estimated Vector error correction model (VECM) results showed that FDI has a significant effect on the services and industry sector, but has a negative effect on the agricultural sector. Impulse response analysis results revealed the correct signs, and confirmed the VECM results. FDI inflows explain a small percentage of growth in agriculture and industry, but a sizable and significant percentage in the services sector.
Economics
M. Com. (Economics)