Abstract

This study assessed the effects of currency volatility on the Johannesburg Stock Exchange. An evaluation of literature on exchange rate volatility and stock markets was conducted resulting into specification of an empirical model. The Generalised Autoregressive Conditional Heteroskedascity (1.1) (GARCH) model was used in establishing the relationship between exchange rate volatility and stock market performance. The study employed monthly South African data for the period 2000 -2010. The data frequency selected ensured an adequate number of observations. A very weak relationship between currency volatility and the stock market was confirmed. The research finding is supported by previous studies. Prime overdraft rate and total mining production were found to have a negative impact on Market capitalisation. Surprisingly, US interest rates were found to have a positive impact on Market capitalisation. The study recommended that, since the South African stock market is not really exposed to the negative effects of currency volatility, government can use exchange rate as a policy tool to attract foreign portfolio investment. The weak relationship between currency volatility and the stock market suggests that the JSE can be marketed as a safe market for foreign investors. However, investors, bankers and portfolio managers still need to be vigilant in regard to the spillovers from the foreign exchange rate into the stock market. Although there is a weak relationship between rand volatility and the stock market in South Africa, this does not necessarily mean that investors and portfolio managers need not monitor the developments between these two variables.

No abstract

Since 1980, South Africa recorded massive budget deficits except in 2007 and 2008 when the budget surpluses as a percentage of GDP respectively stood at 0.3 per cent and 0.7 per cent. This stirred a great debate on whether budget deficits in South Africa are a result of poor governance or are due to the magnitude of the economic problems that the government seeks to alleviate. Therefore, this study examines the economic determinants of budget deficits in South Africa for the period 1980 -2010. Specifically, the study seeks to ascertain if budget deficits in South Africa are a result of the fight against economic problems. The Vector Error Correction Model (VECM) was used to determine the impact of selected macroeconomic variables on budget deficits in South Africa. The results revealed that all the determinants have a positive impact on budget deficits except for foreign debt. However, foreign reserves explain the largest component variation of budget deficit followed by foreign debt, unemployment, economic growth and government investment, in that order.

Unemployment is one of the most topical challenges facing South