CAPITAL MOBILITY IN SUB-SAHARAN AFRICA: A PANEL DATA APPROACH

In this paper we are primarily concerned with assessing the degree of capital mobility in sub‐Saharan Africa. Using the methodology as proposed by Feldstein and Horioka (1980)—later termed the “Feldstein‐Horioka puzzle”—we test the hypothesis of perfect capital mobility against the alternative of imperfect capital mobility. Following Vamvakidis and Wacziarg (1998) and Isaksson (2000), provision is made in our model to show the dependency of the lesserdeveloped countries on international finance and aid and how a more open economy contributes towards improving the level of capital movement in these countries. We also assess the change in the degree of capital mobility over the time period in an effort to see whether institutional and political changes have been successful. We show that, compared to the region, South Africa is, to a large extent, more developed and should therefore play a leading role in the “African Renaissance”. Stationary panel data estimation techniques are applied to a sample of 36 sub‐Saharan African countries over the time period 1980–2000. The benefits of using one‐way error component models are derived from simultaneously employing time and cross‐section dimensions of the data, resulting in a substantial increase in the degrees of freedom. The fixed and random effects models enable us to acknowledge country heterogeneity within the panel, making provision for differences across countries like capital control policies, financial and capital market structures and exchange rate regimes.     

CIGARETTE DEMAND IN SOUTH AFRICA OVER 1996-2006: THE ROLE OF PRICE, INCOME AND HEALTH AWARENESS

The study seeks to re‐investigate the role of price, income and health awareness in the evolution of South African cigarette demand over the period 1996 to 2006. At first glance, rising cigarette prices appear to have played an important role in reducing cigarette consumption over the sample period, especially during the late 90s. But how dependent is the impact of price increases on general economic conditions and overall health awareness among smokers? Health awareness, in particular, has not received sufficient attention in the South African context, due to a lack of data. Previous estimates of price and income elasticities of cigarette demand are based on long annual time series data, which do not allow for changes in underlying tastes and preferences. The paper attempts to disentangle the forces of price, income, health awareness and policy intervention using a quarterly data set. In addition, the study also cautions against the upward bias in estimates derived from formal cigarette sales data – in the light of increasing illicit cigarette volumes in South Africa.     

AID AND DEVELOPMENT IN AFRICA: THE DEBATE, THE CHALLENGES AND THE WAY FORWARD

The article discusses the emerging literature and debates on aid, within the context of expected increases in aid flows to the continent. The trends in ODA flows indicate a reversal in aid flows to the continent since 2000, with subsequent increases in aid intensity and dependence. Although the more recent literature on aid is doubtful if aid only spurs growth in a in a good policy environment, the aid‐institutional debate indicates a clear aid‐institutional paradox, especially relating to the macroeconomic effects, the fiscal response, the absorptive capacity and the good governance aid debates. The literature further indicates that aid could serve as a barrier to vulnerable societies. From the donors' perspective, it is evident that quantity of aid does not imply quality and that the ultimate responsibility lies with recipient governments to ensure more efficient absorption of aid.     

WATER DEMAND AND THE URBAN POOR: A STUDY OF THE FACTORS INFLUENCING WATER CONSUMPTION AMONG HOUSHOLDS IN CAPE TOWN, SOUTH AFRICA

Water demand management is a key focus area for most water managers and even more so in developing countries since improved access to water is important to the poor. Different policies have been introduced to ensure a water management system th at cares for the poor, among them the Increasing Block Tariff (IBT) structure. Studies demonstrate that it is very important to know the shape of the demand curve when deciding on the IBT structure. This paper adds to the understanding of the factors that influence water consumption. The focus is on how water demand patterns vary with the level of income among urban dwellers. The results support the hypothesis that pricing is an ineffective measure to manage water consumption among the poor, while it is relatively more effective for the richest group. Therefore, redistribution using water pricing policy will hardly work.     

THE RELATIONSHIP BETWEEN TOURISM AND TRADE IN SOUTH AFRICA

This article explores the relationship between tourist arrivals and trade in South Africa. Two analyses were conducted – a panel data analysis, which included tourism and trade data of 40 countries with South Africa, and a time‐series analysis that involved South Africa's main tourism and trade partners. Cointegration tests, Granger causality and Block exogeneity tests were used to investigate the nature of the relationship. The results of the panel data analysis show that for South Africa as a whole, there is indeed a long‐term relationship between tourist arrivals and trade, and that bidirectional causality exists. The results for the country case studies are mixed, although the evidence is stronger for the hypothesis that tourism causes trade.     

A NOTE ON THE SUPPLY OF ECONOMISTS IN SOUTH AFRICA

If true delight you would afford him You'd give him Adam Smith to read. A deep economist, indeed, He talked about the wealth of nations; The state relied, his friends were told, Upon its staples, not on gold—This subject filled his conversations. His father listened, frowned, and groaned, And mortgaged all the land he owned.     

INFLATION TARGETING AND THE FISHER EFFECT IN SOUTH AFRICA: AN EMPIRICAL INVESTIGATION

The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, i.e. from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one‐to‐one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short‐run Fisher effect and a long‐run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short‐run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short‐term interest rates and the effects of the monetary transmission mechanism. The long‐run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long‐term interest rate. This suggests that monetary policy has an influence on the real long‐term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework.     

THE EFFECT OF STUDENT CHARACTERISTICS ON ACHIEVEMENT IN INTRODUCTORY MICROECONOMICS IN SOUTH AFRICA

This paper uses OLS regression analysis to examine the effect of student characteristics on performance in Introductory Microeconomics at five South African universities. No consistent race‐effects were found, but Indian students performed significantly worse than Whites at historically‐White universities. Male students outperformed females in general. Older students did better at the historically‐White institutions only. At one university, Black students who speak English as their home language outperformed those who are non‐English speakers. Students who devoted more time to study outside formal classes did better in general. Greater verbal and mathematical ability had large and significant positive effects on student achievement.