Global Growth and Financial Spillovers and the South African Macro-economy

Contents<br/>Introduction<br/>1.1 Risk Aversion Strains, Asset Price And Spreads <br/>1.2 Assessing Co-Movements In Asset Prices<br/>1.3 G7 Growth Versus South African Economic Growth<br/>1.4 Correlation Between South African Trade Variables And G7 Economic Growth<br/>1.5 South Africa's Export Shares Versus Global Economic Growth<br/>PART I: GROWTH SPILL-OVER EFFECTS<br/>2. G8 Economic Growth Spill-Over Into South Africa25<br/>2.1 Introduction<br/>2.2 Recent Growth Spill-Overs Evidence<br/>2.2.1 Regional Sources Of Growth Spill-Overs Evidence<br/>2.2.2 Evidence Of Various Channels Of Transmission<br/>2.3 Brief Discussions Of Various Economic Linkages<br/>2.3.1 Trade Patterns<br/>2.3.2 Foreign Inward And Outward Direct Investment<br/>2.3.3 Real Effective Exchange Rate Movements: Implications For Competitiveness<br/>2.4 Methodology<br/>2.4.1 Poirsson And Weber (2011) Growth Spill-Over Framework<br/>2.5 Data<br/>2.6 Empirical Analysis<br/>2.6.1 How Does South AfricanEconomic Growth Respond To G8 Growth Shocks?<br/>2.6.2 How Did South African Growth Evolve Pre, During And Post The 2008/09 Crisis?<br/>2.6.3 The Role Of Different Transmission Channels<br/>2.6.4 Third Country Growth Transmission<br/>2.7 Conclusion<br/>Appendix 2A <br/>Ordering Sequence<br/>Various Counterfactual Graphs<br/>PART III: GROWTH SPILL-OVERS FROM BRIC<br/>3.1 Introduction<br/>3.2 Dissecting The Role Of China On South African Trade Dynamics<br/>3.2.1 South African Exports To China<br/>3.2.2 South African Imports From China<br/>3.3 Methodology<br/>3.3.1 Poirsson And Weber (2011) Growth Spill-Over Methodology<br/>3.4 Data<br/>3.5 Empirical Results<br/>3.5.1 How Did Bric Contribute To South African Growth During The 2008/09 Crisis And Beyond?<br/>3.5.2 The Role Of Different Transmission Channels<br/>3.5.2.1 Counterfactual Analysis Of Various Channels And Third Country Effects<br/>3.6 Conclusion<br/>Appendix 3A<br/>Ordering Sequence<br/>PART IV: SPILL-OVERSOF FOREIGN FINANCIAL SHOCKS<br/>4. Spill-Overs Of Us Financial Shocks On The South African Economy<br/>4.1 Introduction<br/>4.2 Other Trade And Investment Dynamics <br/>4.3 Recent Studies<br/>4.4 Var Methodology<br/>4.5 Data <br/>4.6 Results <br/>4.6.1 Review Of The Portfolio Balance Model And The Discussion Of The Results<br/>4.6.2 Does The Sample Size Alter The Responses?<br/>4.6.3 Comparison Of The Responses Of Real Interest Rates, Bond Yields And The Exchange Rate Over Various Periods<br/>4.7 Conclusion<br/>Appendix 4A<br/>5. Spill-Overs From The Euro Area Bond Yields On The South African Macro-Economy<br/>5.1 Introduction<br/>5.2 Dissecting The South Africa-Euro Area Trade Linkages <br/>5.2.1 Changes In Export Shares<br/>5.3 Brief Review Of The Portfolio Balance Model Of Exchange Rate Determination<br/>5.4 Var Methodology<br/>5.5 Data<br/>5.6 Results <br/>5.6.1 The Responses To Unexpected Positive Euro Area Bond Yield Shock<br/>5.6.2 The Responses To Unexpected Rise In Selected Effects Of Selected Euro Area Countries<br/>5.6.3 Robustness Analysis Using The Extended Sample Data <br/>5.6.4 Counterfactual Analysis Using The Extended Sample Data<br/>5.7 Conclusion<br/>Capital Flow Effects And The Trade Balance <br/> 6. Capital Inflows And Asset Price Movements In South Africa<br/>6.1 Introduction<br/>6.2 Stylised Relationships During The Inflation Targeting Framework<br/>6.3 Recent Studies <br/>6.4 Var Methodology<br/>6.5 Data<br/>6.5.1 What Are The Initial Responses Of The Variables On Impact?<br/>6.6 Results <br/>6.6.1 Did Capital Inflows Impact Imports And Exports: Implication For Economic Growth 120<br/>6.6.2 What Are The Implications For Financial Stability?<br/>6.6.2.1 The Effects Of Capital Inflows On Financial Vulnerability Indicators <br/>6.6.2.2. How Big Is The Role Played By Capital Inflows Shocks On The Evolution Credit Growth? <br/>6.6.2.3 Residential Property Tobin's Q And Capital Inflows Effects <br/>6.7 Conclusion<br/>Appendix 6a<br/>7. Portfolio Inflow And Outflow Effects On The Economy <br/>7.1 Introduction <br/>7.2 Stylised Facts Of Portfolio Flow Effects<br/>7.2.1 Do Net Portfolio Flows Increase Asset Price Returns? <br/>7.2.2 How Does The Net Portfolio And Capital Inflows Impact Exchange Rate?<br/>7.2.3 Trends In Portfolio Flow Dynamics And Selected Variables<br/>7.2.3.1 Portfolio Flow Dynamics And Real Effective Exchange Rate Changes<br/>7.2.3.2 Portfolio Flow Dynamics And Stock Prices Inflation<br/>7.2.3.3 Portfolio Flow Dynamics And House Price Inflation <br/>7.2.3.4 What Is The Relationship Between Portfolio Flow Dynamics And Economic Growth?<br/>7.3 Var Methodology<br/>7.4 Data<br/>7.5 Results <br/>7.5.1 What Are The Effects Of Positive Inflation Shock On Various Inflows And Outflows?<br/>7.5.2 What Are The Effects Of A Contractionary Monetary Policy Shock On Capital Inflows And Outflows?<br/>7.5.3 What Are The Effects Of Portfolio Outflows And Other Forms Of Outflow Shocks?<br/>7.5.4 What Are The Effects Of Positive Portfolio Inflows And Other Forms Of Capital Inflows Shocks?<br/>7.6 Examining The Role Of Portfolio Flows On Dynamics Of Macroeconomic Variables Using Counterfactual Analysis<br/>7.6.1 Contributions Of Portfolio Flows Versus Domestic Factors Contributions On Asset Prices <br/>7.6.2 Portfolio Flows Versus Asset Price And Domestic Factors: Counterfactual Economic Growth Analysis<br/>7.7. Unexpected Positive Interest Rate Differential Shock On Portfolio Flows Dynamics<br/>7.8 Conclusion<br/>Appendix 7a <br/>8. Investment Slowdown And The Exchange Rate Effects On The Trade Balance 152<br/>8.1 Introduction<br/>8.2 Theoretical Linkages<br/>8.3 Trends In Selected Financial And Macroeconomic Variables<br/>8.4 Var Methodology<br/>8.5 Data <br/>8.6 Results <br/>8.6.1 Does The Evidence Change When We Add More Shocks?<br/>8.6.2 Which Components Of The Trade Balance Transmit The Shocks?<br/>8.7 Historical And Variance Decompositions<br/>8.9 Conclusion<br/>PART IV: EQUITY MARKETS INTERDEPENDENCE AND FINANCIAL STRESS<br/>9. Equity Markets Interdependence In Emerging Market Economies<br/>9.1 Introduction<br/>9.2 The Multivariate Var-Egarch Model<br/>9.2.1 Mean Equation <br/>9.2.2 Variance Equation<br/>9.2.3 Covariance Relationship<br/>9.2.4 Summary Of The Relationships<br/>9.3 Data And Descriptive Statistics <br/>9.4 Main Empirical Findings<br/>9.4.1 Conditional Mean Results<br/>9.4.2 Is There Evidence Of Asymmetric Transmission Based On Conditional Variance?<br/>9.5 How Vulnerable Is The South African Economic Growth To Unexpected Stock Price Returns And Volatility Shocks?<br/>9.5.1 Are There Any Differential Effects Between Stock Returns And Volatility On Economic Growth?<br/>9.5.2 To What Extent Do Stock Price Dynamics That Drive Fluctuations In Economic Growth Differ From Other Shocks?<br/>9.5.3 Do Stock Price Returns And Volatility Transmit Portfolio Outflow Shocks Into The Economy?<br/>9.5.4 Which Shock Between Stock Price Volatility And Monetary Policy Tightening Impacts Economic Growth The Most?<br/>9.5.5 How Would Economic Growth Have Evolved In The Absence Of Stock Price Returns And Volatility?<br/>9.6 Conclusion<br/>10. Financial Stress, Volatility And Economic Activity In South Africa <br/>10.1 Introduction<br/>10.2 The Relationship Between Financial Stress And Macroeconomic Effects<br/>10.3 Recent Studies <br/>10.4 Methodology<br/>10.5 Data And The Financial Stress Index For South African Economy<br/>10.6 Discussion Of The Financial Stress Index Effects On Economic Activity<br/>10.6.1 The Relationship Between Financial Stress And Economic Activity<br/>10.6.1.1 Granger Causality Results<br/>10.6.1.2 Impulse Response Analysis<br/>10.6.2 The Propagation Role Of The Financial Stress Index<br/>10.6.2.1 Does Financial Stress Index Propagates The Effects Of Inflation On Economic Activity?<br/>10.6.2.2 Does The Fsi Propagate The Response Of Interest Rates On Inflation Rate?<br/>10.7 The Effects Of Financial Stresses On The Policy Reaction Function<br/>10.8 Conclusion<br/>11. Conclusion<br/>