The Modelling of South African Exports with Stock Market Liquidity

After considering the proposition of exports being an avenue for ameliorating South Africa’s stagnating economic growth, this article pursues the objective of ascertaining the viability of broadening the scope of the current trade policy to account for financial economic factors based on the endogen...

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Bibliographic Details
Published in:African journal of business and economic research 2021-03, Vol.16 (1), p.67-93
Main Authors: Tsunga, K. R, McCullough, K, Moores-Pitt, P
Format: Article
Language:English
Subjects:
Commercial policy
Competitiveness
Economic factors
Economic growth
Endogenous
Exports
Finance
Foreign exchange rates
Illiquidity
International trade
Liquidity
Liquidity (Finance)
Prices
Securities markets
Stock markets
Stocks
Time series
Trade policy
Volatility
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Summary:After considering the proposition of exports being an avenue for ameliorating South Africa’s stagnating economic growth, this article pursues the objective of ascertaining the viability of broadening the scope of the current trade policy to account for financial economic factors based on the endogenous growth theory and the finance growth hypothesis. Consequently, stock market illiquidity and volatility are included in export demand functions together with the traditionally popular economic variables of foreign income and relative prices as explanatory variables. After employing the autoregressive distributed lag model (ARDL) and the Pooled Mean Group (PMG) between 2003 and 2019 on multivariate time-series, stock market illiquidity and volatility were found to have a negative relationship with exports in both the short-run and long-run. Higher foreign income and lower relative prices were found to boost exports to the world in both the shot-run and long-run, however, exchange rate volatility effects were destination-dependent. It is concluded that in addition to focusing on export competitiveness, the scope of the trade policy must consider the financial economy because liquidity costs incurred by investors and volatility in the financial markets have a negative impact on export growth in the long-run.
ISSN:1750-4554
1750-4562
DOI:10.31920/1750-4562/2021/v16n1a3