Resources, Financial Sector Development, Governance and Growth in South Africa: A Time Series Analysis
Master of Arts (MA)
Semester of Degree Completion
Ahmed S. Abou-Zaid
We examine the impact of financial sector development - proxied by domestic credit and market capitalization - mineral rent, and quality of governance on economic growth in South Africa. The novelty of this thesis lies in the introduction of an interaction term between mineral rent and quality of governance, which is iterated along with the other afore-mentioned variables in a five-model estimation. Two other variables: trade and government expenditure are also added to the mix.
We developed five models to test the impacts of the different variables using the error correction model. In all five models, we find, consistently, a strong positive and significant relationship between the measures of financial sector development and economic growth. However, we find that mineral rent is negatively associated with growth in two of our models. The interaction term between mineral rent and quality of governance shows a positive but insignificant relationship with growth. Granger causality test reports a bidirectional causality between domestic credit and real GDP, a unidirectional causality between market capitalization and real GDP, a unidirectional causality between mineral rent and real GDP and no directional relationship between quality of governance and real GDP.
Abiodun, Kehinde, "Resources, Financial Sector Development, Governance and Growth in South Africa: A Time Series Analysis" (2018). Masters Theses. 3651.