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PurposeThis study aims to interrogate dynamic asymmetric relationships between public debt and economic growth in Southern African Developing Communities (SADC), over the period 2000–2018.Design/methodology/approachThe study employed a panel smooth transition regression (PSTR) technique to analyse dynamic asymmetric relationships between public debt and economic growth, and the threshold effect at which public debt hampers economic growth.FindingsThe findings indicate that there is a significant nonlinear effect of debt on economic growth in SADC. The study discovered a debt threshold of 60% to GDP at which debt beyond this threshold deteriorates long-term growth. The low-debt regime was found to be positive and statistically significant, while the high-debt regime is detrimental for long-term growth. Fiscal policymakers ought to consider the adoption of well-coordinated debt policies that aims to strike a balance between sustainable public debt and economic growth, within a reasonable threshold target.Originality/valueThe study focusses on asymmetric and threshold analysis of public debt on economic growth in SADC using sophisticated panel smooth transition regression (STAR). This study provides rigorous empirical evidence within the SADC perspective in which previous studies have predominantly been confined in advanced economies.

PurposeThis study is aimed at testing the validity of the BARS theory and determining the threshold level at which excessive government expenditure hampers growth. The data from 10 African emerging economies from 1988 to 2019 were used.Design/methodology/approachThe methodology comprises several different stages. In the first stage, an Lagrange Multiplier (LM) type test was employed to find the appropriate transition variable among all the candidate variables to assess the linearity between government expenditure and economic growth and to find the sequence for selecting the order m of the transition function. The linearity test helped to identify the nature of the relationships between government expenditure and economic growth. In the second stage, the model evaluation was tested using the wild cluster bootstrap-Lagrange Multiplier (WCL-LM) test to assess appropriateness of the model. Thirdly, the Panel smooth transition regression (PSTR) model with one regime was estimated to test the validity of the BARS curve.FindingsThe results revealed evidence of nonlinear effects between government expenditure and economic growth, where the size of the government spending was found to be a 27.84% share of GDP, above which government expenditure caused growth to decline in African emerging economies. The findings combined into an inverted U-shape relationship, in line with the BARS theory.Originality/valueThis study proposes that policy-makers ought to formulate prudent fiscal policies that encourage expenditure, which would improve growth for selected countries as their current level of spending is below the threshold. This might be done through: (1) a suitable investment portfolio and (2) spending more on infrastructure.

A panel data analysis of the nonlinear dynamics of economic-development in a macroprudential policy regime was conducted in a panel of 25 emerging markets who were grouped together based on their regions: 10 African countries, 8 Asian countries, and 7 European countries covering the period 2000–2019. The paper explored the validity of the Kuznets hypothesis in a prudential policy regime as well as the threshold level at which economic-development reduces inequality, using the Bayesian Spatial Lag Panel Smooth Transition Regression model. This model was adopted due to its ability to address the problems of endogeneity, heterogeneity, and time and spatial-varying in a nonlinear framework. We found evidence of a non-linear effect between the two variables, where the threshold was found to be US$15,900, above which reduces inequality in the African emerging markets; while for emerging Asian and emerging European markets, we documented a U-shape relationship with an optimal level of economic-development estimated at US$17,078 and US$19,000, respectively. Unconventional and macroprudential policies were found to trigger development-inequality relationships. The result supported the S-curve relationship in these regions. Our evidence largely suggests that policymakers ought to formulate policies aiming at increasing agricultural productivity through land redistribution, investment, trade, and promoting human development. Policymakers should also be cautious when implementing macroprudential and unconventional monetary policies.

PurposeThe primary purpose of the study is to analyse the asymmetric effects of public debt on economic growth, using secondary data over the period 1980–2018 in South Africa.Design/methodology/approachThis study estimated a Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach, using time series data to analyse the asymmetric effect of public debt on economic growth in South Africa.FindingsThe findings revealed a significant nonlinear relationship between public debt and economic growth in South Africa. The results showed an inverted U-Shape relationship, implying a significant positive influence of public debt on economic growth during the low-debt regime. While during a high-debt regime, public debt exerted a significant negative effect on economic growth. The study proposes that policymakers ought to consider targeting a sustainable debt threshold that would enhance efficient use of public finances consistent with long-term economic prosperity.Originality/valueThis paper asymmetries and threshold effects between public debt and economic growth in South Africa, through the application of dynamic nonlinear models namely, Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach. Studies on the relationship under examination have predominantly been confined in advanced economies. This study provides rigorous empirical evidence from the South African perspective.

PurposeThe authors investigate the growth–inequality relationship, using panel data from 13 Southern African Development Community (SADC) countries over the period 1990–2015, to test the validity of the Kuznets and Tribble theories. Furthermore, the authors seek to determine the threshold level at which excessive growth hampers inequality.Design/methodology/approachThe panel smooth transition regression (PSTR) model has several stages. The authors applied the Lagrange multiplier (LM) test to find the appropriate transition variable amongst all candidate variables, to assess the linearity between economic growth and income inequality and to find the sequence for selecting the order m of the transition function. The authors then estimated the PSTR model, but before facilitating the results, the authors first used the wild cluster bootstrap (WCB)–LM-type test to assess the appropriateness of the selected transition.FindingsThe authors found that at lower growth, income inequality tends to be lower, while if growth increases above US$8,969, inequality tends to increase in the SADC region. The findings combine into a U-shaped relationship, contradicting the Kuznets and Tribble theories.Originality/valueThe contribution of this paper is that it becomes the first to provide the threshold level at which excessive growth increases inequality in the selected countries. This study proposes that policymakers should focus on activities aimed at stimulating growth, in other words, activities such as spending more on infrastructure, drawing up a suitable investment portfolio and spending on technological investment for countries that are below US$8,969. An improvement in these activities will create job opportunities, which in turn will add to economic growth and thus lead to lower income inequality and better social cohesion.

The savings-development nexus is a topical issue in current development literature. No study has yet explored this relationship in nineteenth-century ‘South African’ colonies. An historical analysi...

This study employs panel data estimation models to investigate the determinants of household savings in South Africa over the period 2008 – 2012. The novelty of some panel data models is their power to overcome the problems of endogeneity bias, in addition to controlling for unobserved heterogeneity across households. The study used the three waves of the new unique and rich first national representative longitudinal survey, the National Income Dynamics Study (NIDS), which tracks changes in individuals’ livelihoods over time. The distinctiveness of NIDS data is that it is available in a panel format and can be used to investigate the structure and impact of different aspects of socio-economic factors on household savings. The results of this study reveal that household savings in South Africa are strongly driven by income, age structure, education achievement and employment status. Yet the causal nexus between savings and the household size was found to be negative, a sign that larger families compromise households savings prospects.

This article compares the real GDP per capita of the Cape Colony and Natal between 1861 and 1909 with that of Australia's two most developed colonies, Victoria and New South Wales. Estimates of European and non-European GDP per capita for both South African colonies are also provided. Together, this information allows for the first time an evaluation of the growth performance of these important parts of the South African economy in the colonial era. The article concludes that South African performance in this period was stronger than often assumed and that by the beginning of the twentieth century European South Africans, now more fully integrated into a British World economy, operated at a level of GDP per capita that matched and in some places may have exceeded that of Australians. Non-European South Africans, however, did not share in these same advances.

The trajectory of South African economic development starts in the colonial economies. No systematic data exists on the Gross Domestic Product of the territories that formed the Union of South Africa in 1910. A comprehensive project to reconstruct nineteenth-century Gross Domestic Project (GDP) for the different territories can now report for the first time on actual Cape Colony GDP data. This paper presents the findings of reconstructed Cape Colony GDP according to the SNA. It confirms earlier estimates, refines very tentative projections of Cape Colony GDP during the nineteenth century and offers new insights into the nature and direction of the settler economy in the nineteenth century. It also pioneers data on the Cape Colony GDP and is the first in a series outlining nineteenth-century GDP of the territories that formed the Union of South Africa in 1910.

In this paper the South African business cycle is modeled, using a simple linear method and comparing it to non-linear methods. This is useful to address the debate between the Classical and Keynesian economists regarding their views on the business cycle. They believe in a stable economy with exogenous shocks and an unstable economy with an endogenous business cycle respectively. Linear models are usually associated with the Classical view and non-linear models with the Keynesian view. A detailed discussion on the non-linear model-building process, with particular emphasis on the family of STAR models is done. The South African GDP is used and AR, TAR, LSTAR and ESTAR models are fitted and compared. It finds that a parameterized nonlinear model (such as the family of STAR models) outperforms the simple regression model. This is due to asymmetric behaviour in the GDP data and the possibility of a threshold between a recession and an expansion. The results in this paper support the structural or institutional view of business cycles, which states that economic fluctuations are caused by various structural or institutional changes.

The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector.