Browsing by Author "Kahn, Brian"

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    Capital account liberalisation in developing countries implications for South Africa
    (1994) Feketha, Templeton Zolile; Kahn, Brian
    The purpose of this dissertation is to access the desirability of controls on capital movements in South Africa. In line with the general international tendencies towards liberalisation, in recent years there has been increased pressure to lift exchange controls. Despite these pressures, some economists believe there is a need for the maintenance of controls. These arguments are based on issues relating to the inherent desirability of controls as well as the appropriate preconditions for liberalisation. The paper investigates the preconditions for capital account liberalisation, drawing on international experience, and considers whether or not they have been fulfilled in South Africa. In addition, the proper sequencing of capital opening itself is examined. A literature survey is the main research method used, utilising the literature on financial reforms of some less developed countries. The countries of the Southern Cone of Latin America (Argentina, Chile and Uruguay) are used to illustrate examples of failed experiences. In the light of the lessons learned from the above, the major results are that (1) South Africa's capital controls should be abolished, although gradually; (2) macroeconomic stability is the key to successful liberalisation; and (3) a fairly liberal domestic financial system is a prerequisite for external liberalisation.
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    Current account sustainability: evidence from South Africa
    (1999) North, Andrew; Kahn, Brian
    This paper investigates a set of "leading indicators" behind large and persistent reductions ('reversals') in South Africa's current account. It begins by providing a theoretical analysis of current account sustainability based on the intertemporal optimisation of consumption, saving and investment decisions. Drawing on these theoretical concepts, a non-structural approach is then adopted in considering a broad range of indicators that are instructive in evaluating the sustainability of current account deficits. In particular, a country's macroeconomic structure and policy, its external position, and other factors such as expectations, socio-political stability and credibility, are identified as important. Based on event study methodology (Eichertgreen et al, 1995) and work by Milesi-Ferretti and Razin (1997, 1998), a multivariate probit model for South Africa's current account 'reversals' is estimated. Using quarterly data from 1965 to 1996, a binary dependent variable is constructed and used to analyse the impact of various theoretically important variables. The results show that South Africa's current account reversals have been influenced mainly by changes in the country's external macroeconomic environment. These include increases in the OECD economic growth rate, improvements in the country's terms of trade (especially through rises in the dollar gold price), and increasing levels of foreign debt. Reversal periods are typically also associated with rising levels of exports and falling levels of imports. While developments on the capital account were expected, prime facie, to have had a significant impact on the current account, this is not borne out well in the regression results. FDI flows, however, are found to be a statistically significant indicator of current account reversals over the sample period.
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    Dual exchange rates : theory, insulation properties and the South African experience
    (1990) Galloway, D W; Kahn, Brian
    Dual exchange rate regimes are not a phenomenon peculiar only to South Africa. In the past they have been implemented by the BLEU, France, Italy and the Netherlands in one form or another. More recently, multiple exchange regimes have been adopted by other developing countries such as Mexico, Brazil, Venezuela and Argentina. The rationale for imposing a two- or multi-tier exchange regime is to protect the balance of payments from volatile short-term capital flows due to political and economic uncertainty inherent in developing economies. The focus of this paper is on the insulation properties of dual market systems against foreign shocks. These shocks may take the form of foreign interest rate increases or increases in foreign perceptions of risk. An implication of these insulation properties is that the monetary authorities are able to pursue a monetary policy independent of external constraints.
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    Exchange rate policy and the responses to exogenous shocks : the case of Botswana : 1976-1994
    (1996) Dimpe, Utlwanang; Kahn, Brian
    The main objective of this paper is to discuss exchange rate policies in Botswana from 1976 to 1994. It is also an attempt to find out how Botswana has responded to exogenous shocks and whether such responses could be used in the future when shocks recur. The paper contends that Botswana's record in responding to shocks has been impressive. This is not to say that previous policy actions in response to shocks would be adequate when shocks occur again. Experience shows that it is difficult to respond to exogenous shocks when they take time to subside.
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    Leading indicators of currency crisis : an application to the 1996 South African currency crisis
    (1998) Seipone, Ruth Bonolo; Kahn, Brian
    Prior to the 1990 currency crisis theoretical and empirical studies concentrated on establishing the causes of currency crises. Models developed then focused mainly on finding out a fixed exchange rate policy combined with excessively expansionary pre-crisis fundamentals push the economy into crisis with the private sector trying to profit from inconsistent policies. The 1990 currency crises on government controlled exchange rate in Europe and Mexico led to the development of new models called the second generation models on which a crisis occurs when the economy suddenly jumps from one solution to the other resulting in multiple equilibria. In these models the main cause of this multiplicity is the interaction between the private sector and government behaviour. There is no policy inconsistency before the crisis but the crisis itself induces a policy change that make the crises self- fulfilling. Policy- makers and academics have therefore focused their attention on policy discussions that involve identifying indicators of currency crisis. The process involves setting up early warning systems by monitoring the behaviour of certain key indicators.