Research Articles (Economics)

Permanent URI for this collectionhttp://hdl.handle.net/2263/2391

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Commodity risk and forecastability of international stock returns : the role of oil returns skewness
(MDPI, 2025-03) Salisu, Afees; Gupta, Rangan
This study examines the out-of-sample predictability of expected skewness of oil price returns, which serves as a metric for global future risks, as we show statistically through the association with crises of different nature, for stock returns of 10 (8 advanced plus two emerging) countries using long-range monthly data of over a century for each country. Using a distributed lag predictive econometric model, which controls for endogeneity, persistence, and conditional heteroscedasticity, we provide evidence of the strong statistical significance of the predictive impact of the third moment of oil price returns for equity returns for all the countries across various forecast horizons and the length of out-of-sample periods. These findings also hold for the shorter sample periods of 3 other emerging markets: Brazil, China, and Russia. Our findings have important implications for academics, investors, and policymakers.
Time-variation in the persistence of carbon price uncertainty : the role of carbon policy uncertainty
(Elsevier, 2025-06) Cepni, Oguzhan; Gil-Alana, Luis A.; Gupta, Rangan; Polat, Onur; rangan.gupta@up.ac.za
We estimate models of fractional integration to determine the degree of persistence for two recently developed metrics of carbon price uncertainty: the Carbon VIX and Carbon Implied Volatility (CIV) covering the period of the 1st week of September 2013 to the 4th week of December 2022. First, we find the two metrics to be highly persistent but depicting mean-reversion with long-memory. Second, time-varying (recursive) estimation revealed that the underlying persistence is on a downward trend. Third, we show that the recent reduction in persistence of carbon price uncertainties is a result of declining carbon policy uncertainty — a metric we develop using aggregate information on squared surprises of carbon futures price of various maturities. Given that carbon price uncertainty has been shown to negatively affect decarbonization investments, our findings have important implicati HIGHLIGHTS • Persistence of the Carbon VIX and Carbon Implied Volatility (CIV) estimated. • Long-memory models used for weekly data over 2013–2022. • The two metrics are highly persistent but depict mean-reversion. • Time-varying persistence is on a downward trend. • The reduction in persistence is a result of declining carbon policy uncertainty.
Does the introduction of US spot Bitcoin ETFs affect spot returns and volatility of major cryptocurrencies?
(Elsevier, 2025-06) Vassilios, Babalos; Bouri, Elie; Gupta, Rangan; rangan.gupta@up.ac.za
This paper provides the first empirical evidence of whether the introduction of US spot Bitcoin ETFs affected the returns and volatility of major cryptocurrencies. Using data from December 18, 2017 to March 15, 2024, we apply an event-study methodology within a GARCH-based framework. Our results reveal a significant effect of the introduction of spot Bitcoin ETFs on cryptocurrency returns and volatility. The analysis shows a positive impact for Bitcoin, Ethereum, and Litecoin spot price returns around the event date. The volatility of Bitcoin and Ripple spot markets decreased following the introduction of spot Bitcoin ETFs, which supports the stabilization hypothesis for these two cases. We also examine the volatility spillovers using a wavelet coherence approach, and reveal significant volatility spillovers from Grayscale Bitcoin ETF to Bitcoin futures and to a lesser extend to the Bitcoin spot market. Our findings enhance the limited understanding of the price discovery and functioning of the cryptocurrency markets, which could be useful for investors, regulators, and policymakers. HIGHLIGHTS • Study the impact of introduction of Spot Bitcoin ETFs on the cryptocurrency market. • Apply event study methodology within a GARCH framework. • Find a positive impact for Bitcoin, Ethereum, and Litecoin spot price returns. • Volatility of Bitcoin and Ripple decreased, supporting the stabilization hypothesis. • Wavelet coherence analysis reveals volatility spillovers from Bitcoin ETF to Bitcoin futures.
Regulation and bank lending in South Africa : a narrative index approach
(Wiley, 2025-03) Sibande, Xolani; Nxumalo, Dumakude; Mncube, Keaoleboga; Koch, Steven F.; Viegi, Nicola
The extension of affordable credit is a key component of financial inclusion but it could reduce the stability of the financial sector. Prudential policies, on the other hand, are designed to mitigate financial sector risk. Thus, policies aimed at the extension of credit and prudential regulations may be in opposition. This study estimates and contrasts the impact of these potentially contradictory regulations on the bank lending volumes of South Africa's largest banks. We find that announcements of prudential regulation are associated with an increase in secured lending, while the implementation of prudential regulation is associated with an increase in unsecured lending. Despite tighter implementation of prudential reforms, we observe an increase in unsecured lending that is driven by unsecured lending to corporates. Our results also indicate the contractionary effects of prudential regulation on mortgage lending. Furthermore, the estimated effects of efforts aimed at extending credit to households have no impact on bank lending to households but increase secured lending to corporates. The two regulatory approaches overlap with regard to lending to corporates.
Shortages and machine-learning forecasting of oil returns volatility : 1900–2024
(Elsevier, 2025-06) Polat, Onur; Somani, Dhanashree; Gupta, Rangan; Karmakar, Sayar
The objective of this paper is to forecast the volatility of the West Texas Intermediate (WTI) oil returns over the monthly period of January 1900 to June 2024 by utilizing the information content of newspapers articles-based indexes shortages for the United States (US). We measure volatility as the inter-quantile range by fitting a Bayesian time-varying parameter quantile regression (TVP-QR) on oil returns. The TVP-QR is also used to estimate skewness, kurtosis, lower- and upper-tail risks, and we control for them in our forecasting model along with leverage. Based on the Lasso estimator to control for overparameterization, we find that the model with moments outperform the benchmark autoregressive model involving 12 lags of volatility. More importantly, the performance of the moments-based model improves further when we incorporate the aggregate metric of shortages and its sub-indexes, particularly those related to the industry and labor sectors. These findings carry significant implications for investors.
Unlocking mental well-being : the role of workplace social support and organisational justice in the public service
(AOSIS Publishing, 2024-10-23) Marange, Tatenda S.; Mangwanya, Maonei Gladys; Maramura, Tafadzwa C.; Chinyamurindi, Willie T.
ORIENTATION : Public service employees are an important conduit through which service delivery occurs. Yet, South African public service employees face challenges that affect how they work. RESEARCH PURPOSE : This study sought to determine the relationship between public service employee’s mental health accounting for the role of organisational justice and workplace social support. MOTIVATION FOR THE STUDY : Calls exist to understand issues of mental health within the confines of the organisation. RESEARCH APPROACH/DESIGN AND METHOD : A survey approach utilising a convenience sample of 289 public service employees as respondents was utilised. The location of the study was the Eastern Cape province, South Africa. MAIN FINDINGS : The findings show that workplace social support has a direct and positive relationship with employee mental health. Organisational justice has no significant relationship with employee mental health. Workplace social support was found to fully mediate the relationship between organisational justice and employee mental health. PRACTICAL/MANAGERIAL IMPLICATIONS : Strategies can be put in place that inform the promotion of mental health with the public service. These include the need for support services to promote mental health to address organisational issues that impede the pathway of such interventions. CONTRIBUTION/VALUE-ADD : The findings proffer useful precursors to interventions that address the challenge of mental health.
Investigating financial development and its direct and indirect environmental effects in South Africa : fresh policy insights
(Springer, 2024-04) Udeagha, Maxwell Chukwudi; Breitenbach, Marthinus Christoffel
Results on the connection between financial development and CO2 emissions are presented in contradicting ways in earlier research. In order to solve this conundrum, the Environmental Kuznets Curve (EKC) framework is used in this study to examine both the direct and indirect effects of financial development on environmental degradation. Our empirical analysis is supported by the cutting-edge dynamic ARDL simulations framework for the 1960–2020 time span in South Africa. The estimated results, which are based on five separate financial development indices, corroborate South Africa's claim that the country's financial development prevents pollution. For South Africa, we also confirm the validity of the EKC theory. The results of the indirect channels demonstrate that financial development also lessens the negative impacts of income, energy usage, trade openness, and foreign direct investment (FDI) on pollution emissions. A weak financial structure is also necessary for the viability of the polluted haven hypothesis (PHH), which is examined using trade openness and FDI variables. For each of these variables, PHH vanishes at a particular point in financial development. Last but not least, increased industrial value-added increases pollution emissions, whereas increased technical innovation decreases the former. On the basis of these findings, South Africa should offer financial incentives and tax breaks to attract green FDI and encourage investments that prioritize environmental sustainability. These incentives can include grants, subsidies, and preferential tax rates for FDI projects that align with South Africa's environmental goals. Providing a favourable investment climate for green projects can stimulate sustainable economic growth and attract responsible investors.
Moral disengagement and charitable giving : experimental evidence from South Africa
(Wiley, 2025) Chingwere, Fadzay; Nicholls, Nicky; Yitbarek, Eleni; nicky.nicholls@up.ac.za
Moral disengagement has been linked to harmful behaviour and reduced inclination to assist others. Charitable giving, a form of assistance to others, is an important form of domestic resource mobilization in middle-income countries. Moral disengagement can impact decisions regarding charitable giving by enabling individuals to rationalize less generous behaviour. We conducted a survey to investigate how moral disengagement varies across demographic groups and whether moral disengagement helps explain charitable giving. Because studies have shown that interventions can reduce moral disengagement, research highlighting groups demonstrating more moral disengagement can help to target such interventions. Understanding factors associated with moral disengagement can also show whether such interventions might be worthy of investment. We find higher moral disengagement for men and younger and less educated and unemployed respondents. Moral disengagement was a significant predictor of self-reported less frequent charitable giving but not of the amount donated in an incentivised giving task.
A news-based economic policy uncertainty index for Nigeria
(Springer, 2024-10) Salisu, Afees A.; Salisu, Sulaiman; Salisu, Subair
In this study, we develop the first daily news-based Economic Policy Uncertainty (EPU) index for Nigeria, which was previously not covered in recent EPU indices. The need to track economic uncertainties in Nigeria becomes crucial for investment and policy, especially with the renewed interest in the country as an important investment destination. To construct the EPU index, we use relevant keywords from articles in prominent newspapers in the country, covering the aftermath of the global financial crisis and the COVID pandemic, with a data scope of January 2010 to November 2022. We evaluate the predictability of the index by examining its connection with economic and financial variables like exchange rates, stock prices, and inflation in Nigeria. The results are robust to alternative model specifications, data frequencies, and multiple forecast horizons. We hope to extend this exercise to other useful indices, including Geopolitical Risk, Financial Stress Indicators, and Monetary Policy Uncertainty, which are not readily available for Africa, including Nigeria.
Forecasting international financial stress : the role of climate risks
(Elsevier, 2024-04) Del Fava, Santino; Gupta, Rangan; Pierdzioch, Christian; Rognone, Lavinia; rangan.gupta@up.ac.za
We study the predictive value of climate risks for subsequent financial stress in a sample of daily data running from October 2006 to December 2022 of thirteen countries, which include China, ten European Union (EU) countries, the United Kingdom (UK), and the United States (US). The climate risk indicators are the result of a text-based approach which combines the term frequency-inverse document frequency and the cosine-similarity techniques. Given the persistence of financial stress as well as the importance of spillover effects of financial stress from other countries, we use random forests, a machine-learning technique tailored to handle many predictors, to estimate our forecasting models. Our findings show that climate risks tend to have a moderate impact, albeit in several cases statistically significant, on predictive accuracy, which tends to be stronger, in our cross-section of countries, on a daily than at a weekly or monthly forecast horizon of financial stress. Furthermore, the predictive value of climate risks for financial stress is heterogeneous across the countries in our sample, implying that a univariate forecasting model appears to be better suited than a corresponding multivariate one. Finally, the predictive value of climate risks for financial stress appears to be stronger in several countries at the lower conditional quantiles of financial stress.
Profit shifting from Nigeria to Europe : the impact on human rights
(Public Library of Science, 2025-03) Etter-Phoya, Rachel; Murray, Stuart; Hall, Stephen George; Masiya, Michael; O'Hare, Bernadette
The United Nations Universal Declaration of Human Rights states that everyone is entitled to economic and social rights essential to survive and thrive (Articles 25 and 26) and everyone is entitled to a social and international order in which their rights and freedom can be realised (Article 28). These rights must be ensured through national efforts and international cooperation (Article 22), but many millions of people worldwide do not access their rights, including the right to clean drinking water, safe sanitation, healthcare, and education. Government revenue from taxes plays a crucial role in ensuring these rights. However, globally, 10% of corporate tax revenue is lost because multinational corporations shift their profits from where they operate. This study examines the impact of profit shifting on tax revenue in Nigeria, focussing on access to economic and social rights and governance. It estimates the impact of revenue gains made on profits shifted from Nigeria to European tax havens, using data on profits shifted published by Wier and Zucman in 2022 and the Government Revenue and Development Estimations (GRADE) model for the estimations. The findings reveal that if the Nigerian government had additional revenue equivalent to tax losses, an additional 500,000 Nigerians would have their right to drink clean water and nearly 800,000 their right to use basic sanitation each day, 150,000 children would have their right to education, and 11 children would have their right to survive each day (amounting to 4,063 children each year). Increased revenue would also improve governance. In contrast, the gains European tax havens make as destinations for shifted profits in terms of rights are almost negligible, given that almost all Europeans have those economic and social rights discussed in this paper fulfilled. The tax reforms championed by the Organisation for Economic Co-operation and Development (OECD), including 27 European member nations, to tackle aggressive corporate tax avoidance and tax evasion—in short, tax abuse—fall short of ensuring a suitable international order for rights to be achieved. To remedy this, all European countries must support negotiations on international tax cooperation at the United Nations. This should include reforms on regulating multinational corporations, particularly through unitary taxation with formulary apportionment. In the short- and medium-term, interim measures to mitigate the harmful impacts of profit shifting are necessary. Countries must take steps to raise the global minimum corporate tax rate, introduce unilateral measures to tax multinational corporations, improve tax transparency and information sharing with lower-income countries, and strengthen anti-avoidance rules.
Policymaking in periods of structural changes and structural breaks : rolling windows revisited
(Wiley, 2025-04) Giannellis, Nikolaos; Hall, Stephen George; Kouretas, Georgios P.; Tavlas, George S.; Wang, Yongli
Early studies that used rolling windows found it to be a useful forecasting technique. These studies were, by-and-large, based on pre-2000 data, which were nonstationary. Subsequent work, based on stationary data from the mid-1990s to 2020, has not been able to confirm that finding. However, this latter result may reflect the fact that there was relatively little structural instability between the mid-1990s and 2020: The data had become stationary. Following the series of shocks of the early 2020s, this is no longer the case because the shocks produced nonstationarity in the macroeconomic data, such as inflation. Consequently, rolling windows may again be a sensible way forward. The present study assesses this conjecture.
Fast two-stage variational Bayesian approach to estimating panel spatial autoregressive models with unrestricted spatial weights matrices
(Taylor and Francis, 2025) Gefang, Deborah; Hall, Stephen George; Tavlas, George S.
We propose a fast two-stage variational Bayesian (VB) algorithm to estimate unrestricted panel spatial autoregressive models. Using Dirichlet–Laplace shrinkage priors, we uncover the spatial relationships between cross-sectional units without imposing any a priori restrictions. Monte Carlo experiments show that our approach works well for both long and short panels. We are also the first in the literature to develop VB methods to estimate large covariance matrices with unrestricted sparsity patterns, which are useful for popular large data models such as Bayesian vector autoregressions. In empirical applications, we examine the spatial interdependence between euro area sovereign bond ratings and spreads.
Does one size fit all? The country-specific effects of ECB monetary policy
(Elsevier, 2025-06) Gefang, Deborah; Hall, Stephen George; Tavlas, George S.; Wang, Yongli
We investigate the way that a change in the ECB's monetary policy affects the members of the euro area in terms of the main macroeconomic aggregates – including inflation and output. Our data set consists of sixteen countries and covers the period from 2009 to 2023. We introduce a spatial VAR, which allows us to decouple the direct effects of a policy change from the spillover effects of the change. In contrast to standard spatial models, which use a predetermined spatial matrix, we estimate the spatial matrix endogenously, thus providing increased accuracy. We find generally symmetric reactions in inflation, output and the other main macro aggregates both in terms of the timing and the magnitude of shocks, and in the effects of shocks on the decomposition between direct and indirect (spillover) effects although there are occasional exceptions. We find that the indirect effects (spillover) effects are generally smaller than the direct effects but that in all cases they reinforce the direct effects.
Can AIDS education reduce HIV stigma? Evidence from Zimbabwe
(Taylor and Francis, 2025-01) Njokwe, Getrude; Kijima, Yoko; getrude.njokwe@up.ac.za
HIV stigma remains a barrier to HIV prevention, testing, and treatment in sub-Saharan Africa. This study uses Zimbabwe Demographic and Health Survey data to examine how education reduces HIV stigma, focusing on two key initiatives: the 1992 AIDS Action Program, which enhanced HIV awareness, and the 1980 education reform, which expanded schooling access. By addressing gaps in the literature on external HIV stigma, the study highlights education’s long-term impact on attitudes toward people living with HIV. Our findings show that the 1980 reform is associated with a 1.19-year increase in educational attainment and a 42.6% rise in secondary school attendance for children aged 2–7 years in 1980 compared to those aged 16 and older. Furthermore, each additional year of schooling after the AIDS Action Program is associated with a 12.1% reduction in the likelihood of stigmatizing people with HIV and a 12.8% increase in HIV knowledge. Stigma reduction is more pronounced among rural residents (13.3%) and women (5.9%) but is insignificant for men and urban dwellers. These results underscore the role of schools in improving public health knowledge and reducing HIV stigma, offering valuable insights for future educational and health strategies.
Who saves more, the naive or the sophisticated agent?
(Elsevier, 2024-07) Groneck, Max; Ludwig, Alexander; Zimper, Alexander; alexander.zimper@up.ac.za
This paper studies discrete time finite horizon life-cycle models with arbitrary discount functions and iso-elastic per period power utility with concavity parameter. We distinguish between the savings behavior of a sophisticated versus a naive agent. Although both agent types have identical preferences, they solve different utility maximization problems whenever the model is dynamically inconsistent. Pollak (1968) shows that the savings behavior of both agent types is nevertheless identical for logarithmic utility ( = 1). We generalize this result by showing that the sophisticated agent saves in every period a greater fraction of her wealth than the naive agent if and only if ≥ 1. While this result goes through for model extensions that preserve linearity of the consumption policy function, it breaks down for non-linear model extensions.
The impact of the digital economy and institutional quality in promoting low-carbon energy transition
(Elsevier, 2025-01) Hwang, Young Kyu; Venter, Alanda
Given the threat of climate change, the renewable energy transition will play a pivotal role in reaching net-zero goals. The digital economy and institutional quality are considered key enablers of the rapid deployment of renewable energy because they can strengthen the reliability and security of energy systems. This study examines the impacts of the digital economy and institutional quality on renewable energy deployment across 85 countries from 2003 to 2021 using a Two-Step System GMM. The selection of a dynamic panel model is motivated by the path-dependent nature of renewable energy deployment. Sub-sample analyses are conducted to account for the diversity of the dataset in terms of energy mixes, levels of economic development, digital infrastructures, and institutional qualities. A dynamic threshold regression analysis is then conducted to determine the non-linearity of fossil fuel dependence on the impact of the digital economy and institutional quality on renewable energy deployment. The estimates reveal that the digital economy promotes renewable energy deployment, whereas institutional quality has an ambiguous effect. Additionally, depending on the degree of fossil fuel dependency, the impacts of both the digital economy and institutional quality vary significantly and exhibit non-linear and asymmetric features.
A causal analysis between exports, imports and GDP per capita in the southern African customs union countries
(Routledge, 2024) Molepo, Event P.; Jordaan, Andre Cillie; andre.jordaan@up.ac.za
This study investigates the direction of causality between exports, imports and GDP per capita in the SACU countries: Botswana, Lesotho, Namibia, South Africa and Eswatini (Swaziland). The TodaYamamoto augmented Granger no-causality approach is applied. The study finds mixed causality results between exports, imports, and GDP per capita for the different countries. The export-led growth hypothesis is supported for Botswana and Eswatini, while import-led growth hypothesis is only confirmed in Namibia. Results suggest that a bi-directional Granger causality between exports and growth for Botswana and bi-directional Granger causality between imports and growth for Lesotho and South Africa exist. There is therefore no clear time-precedence. Finally, there is evidence of growth-led export hypothesis for Botswana, Lesotho, and South Africa. These mixed findings indicate that SACU countries should not solely dedicate their available resources to pursuing trade openness in promoting economic development but also address domestic economic reform strategies.
Herding behaviour and monetary policy : evidence from the ZAR market
(Elsevier, 2024-06) Sibande, Xolani
We investigated the presence of herding and its interactions with monetary policy in the ZAR market. We achieved this using both the standard herding tests and Sim and Zhou’s (2015) quantile-on-quantiles regressions. Similar to previous results in other markets, we found that extreme market events mainly drove herding behaviour in the ZAR market. This result was also significant in the presence of monetary policy announcements. However, herding in the ZAR markets was not related to market fads. It, therefore, was, in the main, a rational response to public information, indicating central bank credibility. This credibility gives scope to the central bank to improve communication in periods of market crisis to dampen potential volatility. Further studies on the herding of specific ZAR market participants can be invaluable.
Forecasting the realized volatility of agricultural commodity prices : does sentiment matter?
(Wiley, 2024-09) Bonato, Matteo; Cepni, Oguzhan; Gupta, Rangan; Pierdzioch, Christian
We analyze the out-of-sample predictive power of sentiment for the realized volatility of agricultural commodity price returns. We use high-frequency intra-day data covering the period from 2009 to 2020 to estimate realized volatility. Our baseline forecasting model is a heterogeneous autoregressive (HAR) model, which we extend to include sentiment. We further enhance this model by incorporating various key realized moments such as leverage, realized skewness, realized kurtosis, realized upside (“good”) volatility, realized downside (“bad”) volatility, realized jumps, realized upside tail risk, and realized downside tail risk. In order to setup a forecasting model, we use (i) forward and backward stepwise predictor selection and (ii) a model-based averaging algorithm. The forecasting models constructed through these algorithms outperform both the baseline HAR-RV model and the HAR-RV-sentiment model. We conclude that, for the agricultural commodities studied in our research, realized moments play a more significant role in forecasting realized volatility compared to sentiment.

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