An application of the Mundell Fleming model in emerging market economies
- Authors: Tenderere, Morris
- Date: 2023-12
- Subjects: Macroeconomics , Foreign exchange rates , International economic relations
- Language: English
- Type: Doctoral theses , text
- Identifier: http://hdl.handle.net/10948/66039 , vital:74319
- Description: The core objective of this study was to test the applicability of the Mundell-Fleming model in emerging market economies. Despite its importance, no study has examined the applicability of the Mundell-Fleming model in emerging market economies, as far as this study is aware. The Mundell-Fleming model predicts that in an environment with freely floating exchange rates, a drop in interest rates will lead to capital flight, which in turn will result in a fall in the exchange rate and a rise in net exports. The model takes into account both the international flow of capital and the flow of goods and services that might have a big impact on the country. The model's theoretical foundations offer practical instruments for assessing the impact of economic policy in light of the adopted exchange rate regimes of a nation. The model plays a key role in anticipating the link between output, interest rates, and exchange rates. A quantitative approach using panel monthly data over the period 2000 to 2017 for five emerging countries was carried out. Brazil, Malaysia, China, India, and South Africa were the considered countries due to availability of data. The Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least Square (FMOLS) were used to analyse the data. The study confirmed the applicability of the Mundell-Fleming model in the studied countries given a positive relationship between interest rate and portfolio investment. This result means that when interest rates rise, capital flows also increase. In addition, the confirmation of Mundell-Fleming model is reflected in the negative relationship between portfolio investment and the rate of exchange. The Mundell-Fleming model describes how movement of capital and exchange rates behave. The study recommended that to ease the threat of currency appreciation, the Central Banks in merging market economies must ensure that the domestic interest rate is always in line with the world interest rate. This will promote exchange rate stability and whenever there is an appreciation/depreciation the Central Banks must use interest rates to bring back the exchange rate to the desired rate. In emerging market economies, the reserve banks must employ what is referred to as the "sterilization" of capital flows to lessen the threat of currency appreciation. The local component of the monetary base (bank reserves plus currency) is decreased in a successful sterilization operation to counteract the reserve influx, at least temporarily. , Thesis (PhD) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 2023
- Full Text:
- Date Issued: 2023-12
- Authors: Tenderere, Morris
- Date: 2023-12
- Subjects: Macroeconomics , Foreign exchange rates , International economic relations
- Language: English
- Type: Doctoral theses , text
- Identifier: http://hdl.handle.net/10948/66039 , vital:74319
- Description: The core objective of this study was to test the applicability of the Mundell-Fleming model in emerging market economies. Despite its importance, no study has examined the applicability of the Mundell-Fleming model in emerging market economies, as far as this study is aware. The Mundell-Fleming model predicts that in an environment with freely floating exchange rates, a drop in interest rates will lead to capital flight, which in turn will result in a fall in the exchange rate and a rise in net exports. The model takes into account both the international flow of capital and the flow of goods and services that might have a big impact on the country. The model's theoretical foundations offer practical instruments for assessing the impact of economic policy in light of the adopted exchange rate regimes of a nation. The model plays a key role in anticipating the link between output, interest rates, and exchange rates. A quantitative approach using panel monthly data over the period 2000 to 2017 for five emerging countries was carried out. Brazil, Malaysia, China, India, and South Africa were the considered countries due to availability of data. The Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least Square (FMOLS) were used to analyse the data. The study confirmed the applicability of the Mundell-Fleming model in the studied countries given a positive relationship between interest rate and portfolio investment. This result means that when interest rates rise, capital flows also increase. In addition, the confirmation of Mundell-Fleming model is reflected in the negative relationship between portfolio investment and the rate of exchange. The Mundell-Fleming model describes how movement of capital and exchange rates behave. The study recommended that to ease the threat of currency appreciation, the Central Banks in merging market economies must ensure that the domestic interest rate is always in line with the world interest rate. This will promote exchange rate stability and whenever there is an appreciation/depreciation the Central Banks must use interest rates to bring back the exchange rate to the desired rate. In emerging market economies, the reserve banks must employ what is referred to as the "sterilization" of capital flows to lessen the threat of currency appreciation. The local component of the monetary base (bank reserves plus currency) is decreased in a successful sterilization operation to counteract the reserve influx, at least temporarily. , Thesis (PhD) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 2023
- Full Text:
- Date Issued: 2023-12
Export diversification, export specialization and economic growth in G20 countries
- Authors: Siswana, Sinesipho
- Date: 2021-04
- Subjects: International economic relations , Macroeconomics , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/52621 , vital:43693
- Description: This study sought out to empirically investigate whether it is export diversification or export concentration that would help achieve and sustain higher economic growth in the G20 countries using data over the period of 1995 to 2017. The empirical analysis uses the Autoregressive Distributed Lag (ARDL) model within a Pooled Mean Group (PMG) to evaluate the existence of a long run cointegration and as a baseline for examining whether the relationship between export diversification (concentration) and growth is nonlinear through a Nonlinear Autoregressive Distributed Lag (NARDL) model. The ARDL model confirms that the is a long run cointegration between the variables where both export diversification and concentration have a positive impact on growth. On the other hand, the NARDL model confirms that the relationship between export diversification and growth in the G20 countries is a nonlinear where a positive change in diversification has a negative effect on growth, while negative changes have a positive effect, thus, diversification has a negative effect on growth. The NARDL results for concentration do not confirm any nonlinearities, this implies that both positive and negative changes in concentration have negative and statistically insignificant effects on growth. Both the panel ARDL and panel NARDL model are superior models that can account and correct any serial autocorrelation that may exist, thus making the results robust enough. Seemingly, that both export diversification and concentration have a negative effect on growth and this effect may be attributed to the sample being a mixture of developed and developing economies, the study further analysed the effect on to sub-samples (G7 and non-G7). The results for the G7 panel show that there is no evidence of a nonlinear relationship between growth and concentration, as a positive change has a positive effect and a negative change has a negative effect. Overall, the G7 NARDL results are show that concentration will accelerate growth in developed economies in the long run more than diversification. The results for the non-G7 panel the NARDL results show that there is a linear relationship between export diversification (concentration) and growth. The overall, results of the study suggest, that for the G20 countries developmental levels need to be considered in order to know the correct export composition strategy to adopt in order to accelerate growth. With that said, in developed countries like the G7 export concentration would be beneficial in accelerating growth, while in developing countries like the non-G7 countries export diversification would accelerate growth. , Thesis (MCom) -- Faculty of Business and Economic Sciences , Economics, 2021
- Full Text:
- Date Issued: 2021-04
- Authors: Siswana, Sinesipho
- Date: 2021-04
- Subjects: International economic relations , Macroeconomics , Economics
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/52621 , vital:43693
- Description: This study sought out to empirically investigate whether it is export diversification or export concentration that would help achieve and sustain higher economic growth in the G20 countries using data over the period of 1995 to 2017. The empirical analysis uses the Autoregressive Distributed Lag (ARDL) model within a Pooled Mean Group (PMG) to evaluate the existence of a long run cointegration and as a baseline for examining whether the relationship between export diversification (concentration) and growth is nonlinear through a Nonlinear Autoregressive Distributed Lag (NARDL) model. The ARDL model confirms that the is a long run cointegration between the variables where both export diversification and concentration have a positive impact on growth. On the other hand, the NARDL model confirms that the relationship between export diversification and growth in the G20 countries is a nonlinear where a positive change in diversification has a negative effect on growth, while negative changes have a positive effect, thus, diversification has a negative effect on growth. The NARDL results for concentration do not confirm any nonlinearities, this implies that both positive and negative changes in concentration have negative and statistically insignificant effects on growth. Both the panel ARDL and panel NARDL model are superior models that can account and correct any serial autocorrelation that may exist, thus making the results robust enough. Seemingly, that both export diversification and concentration have a negative effect on growth and this effect may be attributed to the sample being a mixture of developed and developing economies, the study further analysed the effect on to sub-samples (G7 and non-G7). The results for the G7 panel show that there is no evidence of a nonlinear relationship between growth and concentration, as a positive change has a positive effect and a negative change has a negative effect. Overall, the G7 NARDL results are show that concentration will accelerate growth in developed economies in the long run more than diversification. The results for the non-G7 panel the NARDL results show that there is a linear relationship between export diversification (concentration) and growth. The overall, results of the study suggest, that for the G20 countries developmental levels need to be considered in order to know the correct export composition strategy to adopt in order to accelerate growth. With that said, in developed countries like the G7 export concentration would be beneficial in accelerating growth, while in developing countries like the non-G7 countries export diversification would accelerate growth. , Thesis (MCom) -- Faculty of Business and Economic Sciences , Economics, 2021
- Full Text:
- Date Issued: 2021-04
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