Browsing by Author "Mutize, Misheck"

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    Analysing the Relationship between Banking Development and Economic Growth: Time Series Evidence from Namibia
    (2020) Diergaardt, Colin; Alhassan, Abdul Latif; Mutize, Misheck
    The main objective of this study is to examine the relationship between banking development and economic growth in Namibia. Namibia has eight licenced commercial banks, four of which have been operational prior to the country's independence; Bank Windhoek Limited, First National Bank Namibia Limited, Nedbank Namibia Limited and Standard Bank Namibia Limited (BON, 2018). The other four licenced commercial banks began operating post independence. The banking development indicators employed by this study were broad money to nominal GDP (M2), private sector credit to nominal GDP (PSC), and lending interest rates (INTR). The data used in this study is annual data, covering the period 1991 to 2018, engaging the VAR/VECM framework in order to determine the presence of a long-run and short-run association. In addition, this study engaged the Granger causality methodology in order to determine the casual association between banking development and economic growth. The error correction term equation suggested a long-run relationship between the variables in the VECM, while the results indicated that there are no short run associations amongst the variables. Further, the results of the Granger causality test indicated a bidirectional causality between LNRGDP and LNPSC. In addition, the causality test showed that lags of LNINTR Granger causes LNPSC, which is consistent with the neoclassical theory of interest rate, which pronounces that interest rates are determined by the demand and the supply of loanable funds. Moreover, lags of LNINTR and lags of LNM2 granger causes LNRGDP, which suggest that banking development causes economic growth. The study recommended that the Namibian banks should reform credit policies and decrease the cost of debt in an attempt to avail more credit to the private sector in order to sustain and stimulate economic growth.
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    The impact of government debt on foreign direct investment in Zambia
    (2022) Mwape, Isaac; Biekpe, Nicholas; Mutize, Misheck
    Zambia is a developing nation that seeks economic growth through gross domestic product (GDP) growth, among other economic drivers. Between the years 2011 and 2020, Zambia embarked on an infrastructure development programme, mainly through construction of roads and airports. To do these projects, Zambia borrowed heavily on one hand while promoting the nation as an attractive destination for foreign direct investment (FDI) inflows on the other hand. The study sought to answer the question, can a country that is highly indebted attract meaningful FDI inflows that would spur economic growth? The research looked at a period of ten (10) years from 2010 to 2020 and analysed publicly available data to form the basis for the findings and recommendations. The research findings show that there is negative, however insignificant relationship between government debt and foreign direct investment. In addition, the findings also show that there is a positive relationship between inflation and FDI. This relationship is significant however, in contrast with a prior expectation. Moreover, a significant negative relationship between interest rate and investment was also established whilst a negative, however insignificant relationship was established between exchange rate and FDI. The implications of the recommended policy issues will only yield the desired results when implemented in an integrated manner as opposed to an exclusive approach. The government debt needs to reduce in order to make the country more attractive to foreign direct investors. Policy also needs to be formulated that should target an inflation rate that contributes to the attraction of a positive net foreign direct invest inflows. Interest rate and foreign exchange rate policies that attract investment will also need to be put in place in order to attract investments that will spur development.
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    Mineral wealth versus resource curse - the stage is set
    (2019) Motlhabane, Kutlwano; Mutize, Misheck; Alhassan, Latif
    The debate regarding the impact of resource wealth being a curse rather than a benefit has been a subject of debate since the 1950’s. Only since Sachs and Warner, (1995) the ground-breaking study which confirmed a negative relationship between resource abundance and economic growth for a selected set of countries there has been a narrative termed the ‘natural resources hypothesis’. This hypothesis asserts that countries with natural resource abundance tend to grow at a slow economic rate than countries with less resource abundance. Africa, being the most resource abundant continent compared to all other continents should be the best illustrator of the hypothesis because of vast mineral wealth coupled with the high level of poverty on the continent. This study seeks to determine if African citizens are on average deemed better or worse off given the abundant natural resources endowed in most African countries in relation to quality of life and income inequality as a measurement tool. The study further examines the effect of resource abundance in African countries, using income inequality as an addition variable above the economic growth. Using a panel data fixed effect estimation model for African countries and Middle East countries from 1970 to 2016, the study finds the existence of a U-shaped relationship between resource rent and income inequality, which supports the literature regarding the Kuznets curve. The study also found that rising consumer price inflation significantly worsens average income inequality within an African country. In addition, a high degree of trade openness significantly reduces income inequality within an African country, if all else is held constant. It is thus concluded that for African countries based on the population level, inflation level, degree of trade openness, and GDP share of domestic savings, accumulation of more coal rents share is expected to worsen average income inequality, while more mineral resource rents share reduces income inequality. The study recommends that African countries should find ways to measure inequality in their respective countries which would better illustrate the general relationship between mineral wealth and income inequality. Equally valuable would be the investment in research such as studies and reports which that would track the distribution of income over time in countries undergoing a mineral boom.
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    The impact of Education on the economic growth of developing countries: the case of Togo
    (2020) Akwei, Kale; Alhassan, Abdul Latif; Mutize, Misheck
    It is acknowledged in the literature that investment in human capital, more precisely education, has a positive impact on economic growth. However, studies have shown that this could not be proven in every country or region. As the 4th principle of the Sustainable Development Goals, education can be a contributing factor to development. This paper examines the impact of education on economic growth in Togo, a developing country, using time series data spanning from 1971 to 2018, which were sourced from the World Bank Database. It is set out to explore the existence of a relationship between education variables and economic growth proxied by the GDP per capita growth; the returns of investment in education; and the impact of the quality of education on growth. The study employed the ARDL ECM estimation method to examine the relationship between the variables used. Although the findings establish long-run co-integration among the variables, the long-run coefficients are statistically insignificant. However, it is evidenced that a change in the gross enrolment rate, mainly in primary education, and government expenditure in education, have a negative relation with GDP per capita growth. Key findings in the short-run estimation reveal that there is a positive and statistically significant relationship between enrolment in primary and secondary education, completion rate in secondary education, and GDP per capita. Notwithstanding the significance of the long-run estimates, the study recommends improved investment in education at all levels of education and a higher reliance on professional education that will quickly train students to enter the job market and perform revenue generating activities.
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    The impact of sovereign credit rating changes on financial market returns in Africa
    (2018) Mutize, Misheck; GOSSEL, S J
    In both developed and developing countries, the extent to which sovereign credit rating announcements bridge the information gap between investors and issuers of securities is debatable. Thus, this thesis investigates the effects of the information provided by credit rating agencies on financial markets in 30 African countries during the period of 1994 to 2014 in order to determine whether long-term foreign currency sovereign credit rating announcements contain material information that influences the secondary market stock and bond returns. The analyses draws the following findings. First, African financial markets are weakly sensitive to sovereign credit rating announcements, which implies that there is no significant evidence of excess market returns influenced by sovereign credit rating announcements. Hence, it is inferred that the announcements of sovereign credit ratings do not significantly change the African financial market returns because they are already perceived to be risky markets, and thus attract mostly passive and long-term investors. Second, the changes in sovereign ratings do not have the same implications for both stockholders and bondholders as shown by the weak positive association between sovereign credit ratings and stock and bond markets. Third, there are marginal regional sovereign rating spillover impacts that are quickly absorbed into capital markets trading long-term securities. However, there are marginal spillover effects that persist over longer time periods in sovereign ratings of countries in the same region from a sovereign rating change in a neighbouring country. These results imply that the regional bilateral linkages between countries serve as channels of capital and sovereign credit rating information flow. Lastly, the sovereign credit ratings do not significantly impact bond market efficiency. In contrast, stock markets show evidence of weak form efficiency implying that long-term sovereign credit ratings positively affect equity market efficiency in Africa. Thus, the empirical findings in this thesis show that the operations of credit rating agencies and their sovereign credit ratings appear to be less important in the operation of stocks and bond markets in Africa. Governments should however take cognizance of the long-term information exchange between investors and borrowers, and the consequential nature of credit ratings to proactively manage the risks of negative sovereign credit rating announcements.