A country's political stability and trends in economic growth are important factors to attract foreign investment. Most developing countries struggle to achieve political stability and high levels of growth. Due to these issues, developing countries attract limited foreign investment. Applying the Bounds test for cointegration, an ARDL model was utilized using time series data from 1995 to 2016, this study examined the potential impact of political risk and gross domestic product (GDP) on foreign direct investment (FDI) flows to the South Africa. Findings of the study revealed that in both short and long run, political risk and economic growth affect the level of foreign direct investment. The political risk rating was found to have a higher impact on FDI flow if compared to GDP. The lower the political risk level (resulting in a highly rated index), the higher the level of FDI inflows. Using the Granger causality approach, empirical results indicated a bi-directional causal relationship between FDI and economic growth, while it was found that political risk causes changes in FDI. In other words, individually, political risk and gross domestic product cause changes in FDI. Based on the study findings, it is imperative for the South African government to reduce the level of political risk in order to increase foreign investment into the country which, in return, could assist in economic growth and welfare. JEL Classifications: F43, O50

Macroeconomic indexes are useful tools in forecasting long and short-run changes in the economy. The purpose of this study is to assess the usefulness of the Purchasing Managers' Index (PMI), and changes in the manufacturing sector as predictors of economic output. This study is quantitative in nature and employed an ARDL econometric model, vector error correction (VEC) and Granger causality approaches to determine the short and long-run relationships amongst the variables. The ARDL method was used as the variables had a mixture of stationarity at levels I(0) and first difference I(1). The model used economic output measured as GDP, as the dependent variable, while PMI, output in the manufacturing sector and CPI (used as the control variable) were the independent variables. Quarterly data sets were obtained from Statistics South Africa and the Bureau of Economic Research (BER) for the period 2000 to 2017. Findings of the ARDL estimation revealed that the variables cointegrate in the long run and changes in manufacturing output had the highest impact on long-run economic growth of the three variables. In the short run, all independent variables had a significant impact on economic growth. The main findings from the Granger causality tests indicate that bi-directional causality exists between both PMI and GDP as well as between PMI and manufacturing output. Additionally, bi-directional causality was found between GDP and manufacturing, while CPI just causes manufacturing changes. The implications of the research is the confirmation of the importance of PMI, CPI and output of the manufacturing sector as indicators for changes in overall economic activity on a macro level.

One of the core objectives of economic development is to improve people’s standards of living. However, both standards of living and consumption expenditures are often determined by disposable income, crude oil prices and exchange rate volatility. The current paper employed quarterly time series data from 2002 to 2020 to analyse the responsiveness of household consumption expenditure to the petrol price, disposable income and exchange rate volatility in South African. The empirical outcome suggested that a long-run relationship exists between variables under consideration. Additionally, the current level of consumption expenditure was found to be determined by income level and exchange rate volatility whilst changes in petrol price had no significant effect on short-term consumption expenditure. Based on these findings, the study suggests that the South African policymakers and government authorities implement policies and strategies that enhance both household income and exchange rate. Those strategies may include strengthening the country’s currency, production improvement, inflation rate reduction, and the creation of job opportunities.

Jobs are the pillars of the economy and aggregate expenditure is among the key factor used to create an employment stimulating environment. This study scrutinizes the relationship between the component of aggregate expenditure and job creation in South Africa form 1995 to 2014. The Vector Autoregressive (VAR) model and multivariate co-integration approach were employed to examine how household consumption, government, investment and export expenditures affect job creation in South Africa. Findings of this study revealed that there is long-run relationship between aggregate expenditure and job creation with government and investment expenditure being the key determinants of job creation in South Africa. Contrary to priori expectation, consumption and exports do not improve jobs creation in South Africa. In the short-run, there are no significant interactions between components of aggregate expenditure and job creation. This study provided recommendation that may assist in boosting job creation in South Africa.

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