Bank Lending and Business Cycles: South African Evidence

Abstract: The paper provides empirical analysis on the linkage between the behavior of bank lending and business cycles in South Africa. Consistent with theory, overall evidence suggesting pro‐cyclicality of bank lending is uncovered both at macro and micro levels. At macro level, bank lending and lending rates have moved in tandem with business cycles. Real borrowing by government was counter‐cyclical to business cycles as would be expected if the role of government was to fine‐tune the economy during booms and recessions. At micro level, bank lending to households and firms was generally pro‐cyclical. Even the growth of provisioning by banks has been largely pro‐cyclical to business cycles, though exceptions were recorded. First, new mortgage lending exhibited counter‐cyclical behavior before 1993. We attributed this behavior to the political and economic climate prevailing then which created uncertainties that made ownership of property a good hedge against economic and political risks. Secondly, the growth of real credit for investment and of foreign trade finance does not appear to have been related to business cycles.     

Technical Efficiency Change in Kenyan Agriculture and the Poor: A Computable General Equilibrium Analysis.

Abstract: A computable general equilibrium model is used to analyze the allocative as well as distributional impact of fifty percent input specific and ten percent general technical efficiency change in Kenyan agriculture. Two alternative specifications of the labour market are adopted to assess the sensitivity of model result to particular conditions prevailing in the labour market. The Kenyan Social Accounting Matrix is used in the model, though this has been aggregated and dis-aggregated in the light of other evidence and arranged to follow the transaction value (TV) approach. Technical efficiency change does not appear to be significantly affected by the different specifications. Input specific technical efficiency change results in a small improvement in agricultural production, income and the GDP. The impact, though small, is mixed on labour employment. General efficiency improvement on the other hand, results in a significant boost to agricultural production and a modest improvement in GDP; it also results in a boost to household income and real consumption. Résumé: On a utilisé un modèle informatisé d'équilibre général pour analyser l'impact de l'affectation et de la distribution de cinquante pour cent du changement de l'efficacité technique liéà des facteurs spécfiques, et de dix pour cent du changement général de l'efficacité technique, sur l'agriculture kényane. On a adopté deux caractéristiques interchangeables du marché du travail pour évaluer la sensibilityé du résultat du modèle vis-à-vis des conditions particulières qui prévalent sur le marché du travail. La matrice de comptabilité sociale du Kenya a été utilisée dans le modèle, bien que celuici ait été globalisé puis venulé en fonction d'autres données, et aménagé pour tenir compte de la méthode de la valeur de transaction. Le changement de l'efficacité technique ne semble pas être affecté de manière significative par les différents caractéristiques. Le changement de l'efficacité technique dûà des facteurs spécifiques provoque une petite amélioration de la production agricole, du revenu et du PIB. Et l'impact, quoique minime, est tout de même varié en ce qui concerne l'utilisation de la main-d'œuvre. Par contre, l'amélioration de l'efficacité généerale donne une grande impulsion à la production agricole et génère une légère amélioration du PIB; il stimule également le revenu et la consommation réelle des ménages.     

Interest rate reforms,financial deepening and economic growth in Cameroon: an empirical investigation

The impact of interest rate reforms on financial deepening and growth in Cameroon is examined. We employ five proxies of financial deepening against deposit rate, a proxy for interest rate reforms. The impact of interest rate reforms on financial deepening is sensitive to the proxy used for financial deepening. The impact is almost negative and significant for all the indicators, except for the ratio of broad money to Gross Domestic Product, where it is positive and significant in the first lag. This means that financial repression helps improve broad money and hinders the development of the other indicators of financial development in Cameroon.     

International tourism and economic development in South Africa: a Granger causality test

One of the major objectives of macroeconomic policies in many developing countries is sustained economic growth, and South Africa has been striving to achieve and maintain this in various ways. One of these is through international tourism. Although international tourism contributes to the growth of many economies, it is in turn, impacted by growth in many developed countries. Real gross domestic product (GDP), international tourism earnings, real effective exchange rate and exports were analysed within a multivariate vector auto regressive model using annual data covering 1980–2005. The main focus of this study therefore was to demonstrate the direction of causality between international tourism earnings and long‐run economic growth of South Africa, among other variables, using Granger causality analysis. The result obtained showed a unidirectional causality running from international tourism earnings to real GDP, both in the short run and in the long run. The error correction mechanism carried out also supported this causality. Copyright © 2009 John Wiley & Sons, Ltd.     

A supply‐response analysis of Botswana's livestock and sorghum: An error‐correction approach

This article is a supply‐response analysis of Botswana's livestock and sorghum relative to agricultural/non‐agricultural prices (terms of trade), and of capital‐labour ratio, using an error‐correction method. Aggregate capital‐labour ratio is included to measure the importance of resource endowment in particular sectors. There has been, on average, a small progressive increase in livestock terms of trade and a decline in that of sorghum. Improvements in livestock price terms of trade encourage increased livestock (cattle) supply whereas declining terms of trade reduce sorghum production. The current arable pricing policy of the government is therefore of limited potential in transforming the sub‐sector. Increases in capital‐labour ratio tend to reduce agricultural production in the Botswana economy.     

Agriculture and the migration of labour to a capital city: The case of Gaborone,Botswana

This study examines some aspects of rural urban migration in Botswana, focusing in particular on Gaborone, the capital. Models are specified that relate age grouping, sectoral income differential, government employment and time to male and female migration. Econometric models were based on published data. The study indicates that there is a positive relationship between migration and central government employment, expressed as a proportion of total formal employment. The differential between agricultural and average non‐agricultural income, especially for male migrants, is also positively related to migration. The results show that with time, male and female migration to Gaborone is likely to increase. Male migration is positively related to arable crop cultivation, whereas female migration has an adverse effect on it. Neither has any significant influence on harvested crop area in Botswana     

The Implementation of The Gambian Agricultural Development Policy: Lessons from Impact

Abstract: The paper examines the state of Gambian agriculture and the nature of past and present government policies that have been implemented for the development of the sector. Gambian agriculture is still largely based on the traditional system of shifting cultivation using very small independent farming units. Yields are generally low. Post independence agricultural policy focused on institution building and hence encouraged the creation of agricultural institutions, kept producer prices low and exhibited a strong component of input subsidy. Gambian agriculture has been unable to respond greatly to these inducements and other initiatives as yields remain practically stagnant and production revolves around a declining trend. The faulty implementation of subsidized credit programme resulted in regressive income transfer to a small group of influential Gambians who defaulted on large loans. The result was a weakening of the financial system and the collapse of Development Banks. There was a policy turn-around during the economic recovery programme and the subsequent programme for sustained development. Agricultural input subsidies are being progressively removed to assure long term policy sustainability though producer prices are still lower than the free market levels. Résumé: Dans ce document on analyse la situation de l'agriculture gambienne ainsi que les caractéristiques des politiques antérieures et actuelles mises en oeuvre par le gouvernement pour développer ce secteur. L'agriculture gambienne reste largement tributaire du système traditionnel de cultures itinérantes sur des petites parcelles autonomes. Les rendements sont généralement faibles. La politique agricole après l'indépendance a mis l'accent sur le renforcement institutionnel, et a done encouragé la mise en place d'organismes agricoles, le maintien des prix à a production à un niveau bas. Cette politique a souligné l'importance accordée à la composante subvention des intrants. L'agriculture gambienne n'a pas réagi très sensiblement à ces mesures incitatives et autres initiatives puisque les rendements restent presque stationnaires et que la production enregistre toujours une tendance à la baisse. L'exécution peu satisfaisante du programme de crédit subventionné s'est traduite par une baisse du transfert de ressources octroyées à un petit groupe de gambiens influents qui n'ont pas honoré leurs engagements s'agissant du remboursement de prêts élevés. Cette situation a affaibli le systeme financier et entraîné la faillite des banques de développement. Pendant la période d'application du Programme de relance économique et du programme ultérieur pour le développement durable, il y a eu une réorientation de la politique. Actuellement, les subventions accordées pour l'achat d'intrants agricoles sont progressivement supprimées afin d'assurer une politique viable à long terme, bien que les prix à la production restent inférieurs à ceux du marché libre.     

The relationship between budget deficit and interest rates in South Africa: some econometric results

This article investigates the budget deficit–interest rate relationships in South Africa, using two econometric methods: the London School and the Granger‐causality methods. The results suggest that budget deficits have no effect on interest rates in South Africa. The causality results reinforce this finding by indicating that budget deficit and interest rates in this country are independent.     

Estimating profit efficiency among South African retail firms using stochastic frontier approach

This paper analyses profit efficiency of selected retail firms in South Africa over the 2005–2006 period. A stochastic frontier analysis method is used. The 24 retail firms covered are ranked in terms of their efficiency performance over this period. Their efficiencies have also been tracked over time. Approximately 50% of the firms are estimated to have profit efficiency estimates higher than the average estimated for the sampled firms. The top 10 firms are performing significantly better than the average profit efficiency of 0.39. The profit efficiency of the top three firms is more than double the observed average profit efficiency performance of the sampled retail firms. However, the bottom 50% of the retail firms has performed poorly.