Business cycle co-movements between South Africa and the BRIC countries

Abstract

This paper investigates the co-movement of business cycles between South Africa and the other BRICS countries namely, Brazil, Russia, India, and China, the so-called BRICs. In particular, it identi…es the nature and key features of the co-movement of cycles of South African economy with cycles of the BRICs. It uses the dynamic factor model to a set of 307 macroeconomic series during the period 1995Q2-2009Q4. We …nd signi…cant evidence of synchronization between South Africa and the BRIC countries over the business cycle, although the magnitude of co-movement di¤ers with each country. India portrays strong ties with South Africa over time. Moreover, Brazil, China, and Russia lead South Africa in the long-run, while India is contemporaneous. Further, the …ndings imply that the …rst two factors are BRICS factors while the third one is a US factor.

Transmission of China's Shocks to the BRIS Countries

“…Therefore, these results point to the relevance of trade as the main channel of the transmission of shocks rather than financial linkages. These findings are consistent with Çakır and Kabundi (2013a), who find strong trade linkages among the BRICS countries.…”

“…China mainly exports manufactured goods to these countries and imports natural resources (Rangasamy and Swanepoel, 2011;Jenkins, 2012). For instance, commodities, especially metal products, dominate South Africa's exports to China (Rangasamy and Swanepoel, 2011) while South Africa's imports from China consist mainly of machinery and electrical equipment, textiles, clothing and footwear (Çakır and Kabundi, 2013a). Brazil's exports to China are commonly concentrated in a small number of primary products while its imports from China consist mainly of manufactured goods (Jenkins, 2012).…”

“…Many emerging economies have gained in prominence as their economic activities now have significant ripple effects in other countries, including the developed ones (Akin and Kose, 2008). As far as geopolitics is concerned, five emerging economies -Brazil, Russia, India, China and South Africa (BRICS) -are rapidly becoming integrated and increasingly important to the world economy (Çakır and Kabundi, 2013aKabundi, , 2013b. These countries intend to strengthen their multilateral cooperation by way of the alliance of the BRICS group.…”

“… Factor analysis has been used by Forni et al (), Kabundi (), Kabundi and Nadal De Simone (), Doz et al (), Crucini et al () and Çakır and Kabundi ().…”

“…More details can be found inForni and Lippi (2001) andStock and Watson (2002a,b).4 Factor analysis has been used byForni et al (2005),Kabundi (2009),Kabundi and Nadal De Simone (2011), Doz et al (2011), Crucini et al (2011 and Çakır andKabundi (2013b).…”