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An empirical analysis of the role of imports in the South African economy

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dc.contributor.advisor Bell RT, Prof en
dc.contributor.advisor Contogiannis T, Prof en
dc.contributor.author Gumede VT en
dc.date.accessioned 2016-09-22T10:15:49Z
dc.date.available 2016-09-22T10:15:49Z
dc.date.created 1997 en
dc.date.submitted 2000 en
dc.identifier.uri http://hdl.handle.net/20.500.11892/81394
dc.description.abstract It is generally acknowledged, that there is no sufficient, exhaustive and elaborate empirical examination of the quantitative impact of policies pertaining to import demand and economic growth in South Africa. In order to arrive at conclusive sagacious and applicable policies on the economic growth potential of an economy, it is imperative to evaluate, empirically, whether envisaged economic growth rates and employment creation are feasible, given the socio-economic circumstances. The fundamental question of the constraint or rather effective constraints to high economic growth rates, measured by gross domestic product, has always desired urgent attention but has been neglected. There appears to be strong reasons to believe that the South African economy, like other middle-income developing economies, is subject to a "powerful balance of payments constraint that effectively aborts the growth process before it is able to deliver rising per capita incomes" (Industrial Strategy Project', 1995 ,49). Furthermore, although this issue is widely recognized, there has been little systematic analysis of this important question. Many writings which, implicitly or explicitly, note the foreign exchange shortages as adversely affecting the economy's growth capacity have tended to focus and give enormous emphasis on exports and export expansion as a means to eradicate this economic dilemma. However, together with exports the demand for imports clearly determines the behavior of the trade account of the balance of payments as a whole. "Consequently, this dissertation intends to consider one important aspect of the balance of payments constraint, namely, the determinants of the demand for imports in South Africa and the behavior of foreign trade". This study briefly examines the theoretical foundations, of the savings and: foreign exchange constraints using the 'two-gap' model. In that. The main lesson is that the economy characterized by foreign exchange bottlenecks and/or lack of savings will not accomplish its perceived growth capacity. This is the background and motivation, for the study of import demand elasticities as it, gives impetus to the importance of both imports and exports in an economy. The dissertation derives the import demand function and employs the recent time-series techniques to modeling economic time-series. Prior to the empirical model, the study quantitatively describes the behavior of both imports, and exports, though more emphasis is placed on the former than the latter. In this section, simple quantitative techniques are utilized in order to determine the cyclical and trend behavior of import performance since the beginning of the 1970s. The study also briefly looks at the relationship between import of capital goods and investments into South Africa. Description of trade behavior involves examination of trade flows and their geographical destination by regional trading blocks. That is followed by an extensive literature survey conducted on import demand elasticities in South Africa and trade elasticities in general. This analysis gives a strong background to the time-series model of import demand estimated in this work. Time-series analysis examines the import demand at both aggregate and sectoral levels. Prior to the empirical model chapter there is an overview of time-series econometrics with regards to co-integration, error correction and non-stationary data. Import performance and import demand functions were studied in an economic policy context and the analyses were in some cases restricted by data constraints. Import behavior patterns and empirical results of the import demand models are discussed and international comparisons are drawn. There are a few basic points that emanate from the overall discussion. In the import performance section, it can be. concluded that "(1) labour intensive commodities have the largest share in total imports as indicated by composition by main economic sectors and sub-sectors; (2) South Africa exports relatively large volumes, of capital intensive goods; (3) There is a very steady, insignificant decline in import penetration ratios but these have increased lately; (4) exports have slowly increased whereas, the 1980/85 period shows overall negative growth rates for both imports and exports; (5) the import-investment relationship is tentatively confirmed; and (6) the over all trade volumes have increased with the Southern African market taking an increasing share whilst other regional markers maintained relatively stable and sometimes steadily decreasing percentage shares". The description of studies or literature surveys shows that the demand for imports is largely influenced by economic activity as compared to relative prices. Some of the results are shown in the appendices and discussed in section 6.7, where comparisons are made between the results of different studies and the main findings of this dissertation. "Precisely, the major finding is that, as other studies concluded, the propensity to import with respect to income is more significant than the price elasticity of demand for imports". The import performance findings combined with time-series estimation results raise doubts to envisioned employment creation levels and economic growth rates in South Africa. This is questionable because South Africa's imports have been on an increase whilst exports have not performed well. From the time-series point of view and based on estimation results, the current economic strategies should also address the import demand question or foreign exchange and domestic economy development if the projected growth rates and employment levels are to be achieved. en
dc.language English en
dc.subject Economics en
dc.subject International economic relations en
dc.title An empirical analysis of the role of imports in the South African economy en
dc.type Masters degree en
dc.description.degree MA en


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