Journal of Economics and Financial Analysis

In recent years, investors have drifted towards investments in emerging markets with better risk-return trade-offs, however, these markets are generally characterized by high political, financial, and economic risk. Given the rising popularity of Exchange Traded Funds (ETFs), the objective of this study is to investigate the effect of disaggregated country risk on the returns of the South African ETF market. The study utilises a sample of South African ETFs which are segregated based on their benchmarking strategy (that is, purely domestic benchmarks or international benchmarks), and the sample period ranges from the inception of the first ETF in the respective market till December 2019. A linear and non-linear Autoregressive Distributed Lag (ARDL) approach is used to explore the long- and short-run effects; however, the findings of this study suggest that country risk shocks have significant asymmetric effects on returns. Further analysis suggests that, in the long-run, ETFs with domestic benchmarks are most sensitive to political risk decreases whilst ETFs with international benchmarks are most sensitive to political risk increases. In the short-run, ETFs with domestic benchmarks are only influenced by political and financial shocks whilst all country risk components impact ETFs with international benchmarks. Overall, these findings can assist investors, rating agencies, multi-national enterprises, and policymakers in understanding the effects of country risk components on ETF markets.

The fundamental aim of this study is to examine the intricate interplay among gold prices, interest rates, exchange rates, and stock price indices within the context of South Africa. To achieve this, both a conventional Vector Autoregression Model and a Bayesian Vector Autoregression Model were applied to monthly data spanning from June 1995 to December 2022. The findings indicate that a positive shock in stock prices triggers positive reactions in exchange rates, gold prices, and interest rates. Conversely, a positive shock in interest rates induces negative reactions in both gold prices and stock prices. Moreover, a positive shock in gold prices elicits negative responses in both interest rates and stock prices. Additionally, a positive shock in exchange rates prompts positive reactions in gold prices and interest rates, while simultaneously resulting in a negative response in stock prices.

This paper examines the effect of macroeconomic variables on government bond yields of different maturities under two regimes in South Africa. The study employs a Two-Stage Markov regime-switching model to analyze monthly time series data from March 2009 to October 2022. It attempts to explain variations in 1-3 year, 3-7 year, 7-12 year and +12 year government bond yields with six independent variables such as inflation, real GDP, real short-term interest rates, real long-term interest rates, real money supply, and the real Rand/Dollar exchange rate.
As a result, the study finds that the performance of government bond yields varies with market conditions, as per the adaptive market hypothesis (AMH). More specifically, the returns of the 1-3 year bond index are influenced by real GDP in a bull regime, while the performance of the 3-7 year government bond yield is affected by real GDP in a bear market condition. Additionally, the inflation growth rate influences the performance of the 7-12 year government bond yield in a bull market regime, but not in a bear regime.
It also documents that the bear market conditions prevail among selected bond index returns, with the 12-year government bond yield staying in a bull state for 12 months, while the 7-12 year government bond yield stays the longest in a bear state (19 months). These findings demonstrate that the South African bond market is affected by changing conditions. Therefore, the interaction between the macroeconomy and bond performance is better explained by AMH, and there is potential for improved explanatory power through the use of nonlinear modeling techniques.

This paper endeavours to investigate the nexus between financial inclusion and economic growth, elucidating the positive effects stemming from the broadening utilization of financial services within society using panel data encompassing ten countries —Argentina, Armenia, Chile, Costa Rica, Georgia, India, Moldova, Montenegro, Poland, and Saudi Arabia— over the periods of 2010-2019.
The findings reveal that there exist initial positive effects on GDP concomitant with the expansion of financial services usage, followed by subsequent positive effects that may manifest irrespective of further expansion. From an econometric standpoint, this implies a positive response of the GDP indicator to the augmentation of financial services expansion indicators and conversely, a negative response to their decline. Thus, it concludes mixed relationships, characterized by the amalgamation of two distinct responses of the dependent variable concerning its association with the independent variable.

Farmers face considerable challenges in negotiating contracts, determining production levels, and fulfilling contractual obligations due to the inherent uncertainties associated with agricultural activities, including fluctuations in weather conditions, pest infestations, and crop diseases. Thus, this research delves into the decision-making processes within the rice farming sector in Nigeria, specifically examining the comparative profitability between contract and non-contract farming systems through Gross Margin analysis and the Maximax and Minima criteria.
Utilizing Ordinary Least Squares (OLS) technique on a randomly selected sample of 126 rice farmers from Ekiti State, Southwest Nigeria, our analysis reveals that rice farming in the region is economically viable, with contract farming demonstrating greater profitability compared to non-contract farming. The profitability of paddy rice cultivation is notably influenced by several factors, including farming experience, participation in cooperative associations, age, access to extension services, and agricultural training. Specifically, we observe that years of farming experience, membership in the association, and access to extension service positively influence profitability of paddy rice production of contracted farmers; while farmer age and formal training positively influence profitability of paddy rice production of non-contracted farmers.
Moreover, our study indicates that optimistic farmers are inclined towards adopting the contract farming model, while pessimistic farmers tend to favor non-contract arrangements. Thus, we recommend that optimistic farmers consider engaging in contract farming, while a non-contract approach is advisable for pessimistic rice farmers.