The role of financial sector development in economic growth has received an extensive attention in the literature. Indeed, a well–developed domestic financial sector such as those of developed countries, can significantly contribute growth by increasing savings and investment, improves technological innovations and efficiently allocates resources. The development of the financial sector entails the institutionalization of policies governing the sector. Financial development in sub–Saharan Africa (SSA) remains low although the sector continues to grow in recent times with the hope that such improvement in the financial sector will enhance economic growth. Extant studies in the literature on finance–growth nexus remain inconclusive and little is also known on the overall effect on growth via the interaction of the real and financial sector. Given the relationship between financial development and economic growth, the central theme of this paper is that the extent to which finance helps growth depends crucially on the simultaneous growth of real and financial sectors. By relying on data spanning 1980–2014 for 29 SSA countries, this paper examines the effect on economic growth when credit growth outstrips the solvency needs of the real sector, and how this impacts on growth. We present crucial findings on the effect of disproportionate sectoral growth rates from the lenses of developing economies. Our evidence resolves the seemingly conflicting and highly contested findings in the finance–growth literature and provides crucial guidance for conducting effective monetary policy aimed at propelling growth.
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Research Briefs
The Comfort of the future: The role of Social Norms in Constructing the Ideal towards Sustainability – A Randomised Field Experiment
In the environmental sustainability (ES) movement, the challenge of modifying human behaviour for effective demand side management of resources has been highlighted. This challenge is peculiar in the Tourism Accommodation Industry (TAI) as managers struggle to balance the need to be sustainable with their objective of providing comfort for their guests. Consequently, the uptake of many sustainability initiatives in the industry is limited. To address this challenge, a solution to foster the uptake of ES practices in establishments in the industry is proposed. This solution is based on the argument put forward by Elizabeth Shove and some of her colleagues, that comfort is largely socially constructed, contradicting the positivist approach which emphasises the biological and psychological nature of comfort. Although Shove does not focus on tourism, her argument is adapted for the TAI context. The solution is targeted at reducing energy consumption from Heating, Ventilation, and Cooling (HVAC) in these TAEs, but with possibility for expansion to water saving initiatives as well.
A Longitudinal Analysis of the Demand for Cigarettes in South Africa
Tobacco use is a major health problem, resulting in many millions of needless deaths every year, including many third-party innocent non-smokers (second-hand smokers). This has prompted most governments and many international organisations like World Health Organisation (WHO) to develop a Framework Convention on Tobacco Control (FCTC), with the aim to reduce tobacco consumption and smoking-related morbidity and mortality. Among the various tobacco control policies, tobacco taxes are shown to be the most effective in reducing tobacco use. South Africa is noted to have used large excise taxes to reduce cigarette consumption by almost half per adult within 15 years after transition to democracy in 1994. In 2010, the tobacco market structure in South Africa changed substantial (from near monopoly to a more competitive market). From this period, cigarette prices and smoking prevalence have remained fairly constant. There is need to revisit the tobacco tax reform in this new market structure. However, this require new evidence on how the marginal changes in price within this period affect individual smoking behaviour.
Latest Publications
Taxpayers’ behavioural responses to Voluntary Disclosure Programmes: evidence from South Africa
South Africa, like any other country, strives towards greater tax revenue mobilisation. One possible explanation to low revenue levels is non-compliance by taxpayers.
Order flow and rand/dollar exchange rate dynamics
This paper uses the microstructure approach for the South African foreign exchange market to determine the impact of order flow on the rand/US dollar exchange rate over the short and long term.
Foreign Direct Investment, Sectoral Effects and Economic Growth in Africa
Earlier studies on the impact of foreign direct investment (FDI) on economic growth have not been instructive largely on their failure to examine the sectoral transmission channels through which FDI affects overall growth.
Skill Shortages as a Barrier to Women’s Start Ups: A Model with Evidence from Eswatini
The shortages of entrepreneurial skills, both perceived and actual, have lowered the rate of opportunity-driven women’s entrepreneurship.
The household effects of very large electricity tariff hikes in Zambia
This paper simulates the real household expenditure effects of electricity price increases in Zambia. First, we find that electricity subsidies are highly regressive.
Latest Journal Publications
The Impact of Political Competition on Economic Growth: Evidence from Municipalities in South Africa
South African Journal of Economics (https://onlinelibrary.wiley.com/doi/full/10.1111/saje.12208)
This paper examines the impact of political competition on economic growth.
Effect of Financial Development on Economic Growth in sub–Saharan Africa: Does Sectoral Growth Matter?
Journal of Policy Modelling (https://www.sciencedirect.com/science/article/pii/S0161893818301170)
This paper examines the overall economic growth effect when the growth in finance and real sector is disproportionate relying on panel data for 29 sub–Saharan African countries over the period 1980–2014.
Impact of macroeconomic announcements on foreign exchange volatility: Evidence from South Africa
South African Journal of Economics (https://onlinelibrary.wiley.com/doi/abs/10.1111/saje.12160)
This study focuses on scheduled macroeconomic news announcements and evaluates their impact on the volatility of the South African rand (ZAR) and US dollar (USD) exchange rate using high frequency data.
Race to the top: Does competition in the DSL market matter for fibre penetration?
Telecommunications Policy (https://www.sciencedirect.com/science/article/abs/pii/S0308596117302045)
High speed broadband creates potential productivity gains and has a positive impact on economic growth.
Pareto Optimality and Indeterminancy of General Equilibrium under Knightian Uncertainty
Journal of Mathematical Economics 2018 (https://www.sciencedirect.com/science/article/pii/S0304406818300570)
This paper studies general equilibrium theory, for both complete and incomplete markets, under Knightian uncertainty.
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