Finance and Competitiveness in Developing Countries

By José María Fanelli; Rohinton Medhora | Go to book overview

Notes
1
We benefitted greatly from the discussions with the other participants in this project and from access to the earlier drafts of their papers. Valuable assistance was provided by the Industrial Development Corporation, including access to its database. Professor Leon Brümmer of the Bureau for Financial Analysis, University of Pretoria, kindly provided the data for companies listed on the Johannesburg Stock Exchange for analysis in Section V, under 'Investment, finance and economic instability'. Senior members of ABSA Bank, First National Bank, Nedbank and Standard Bank gave generously of their time to discuss some of the financial aspects of the paper. Troy Elyea, who provided outstanding research assistance, produced Figure 7.8, performed the regression analysis for Section V, 'Investment, finance and economic instability', and gave considerable help in the final stages of the production of the chapter. A major part of the research expenses incurred by Trevor Bell was funded by a research grant from the Liberty Life Foundation for a project that includes the subject of this chapter. To all of the above, none of whom bears any responsibility for the views expressed in this chapter, we are most grateful. Greg Farrel hasa contributed to the study in his personal capacity and the views expressed are not necessarily those of the South African Reserve Bank.
2
In Figure 7.1, the growth rate for 1975, for instance, is the average GDP growth rate for 1974 and 1975.
3
The method used there in estimating potential or capacity output is an adaptation of Panic (1978), as described by Christiano (1981:151-4). Capacity output is obtained by multiplying the estimated output/capital ratio (Y/K) (derived from a shifted regression of Y/K), for each year, by the actual capital stock in that year. The capital stock data used in the estimation of capacity GDP are from the South African Reserve Bank. The two-year moving average is calculated in the same way as for Figure 7.1 described above.
4
The index of capacity utilisation (the ratio of actual to potential GDP, calculated as described above, with 1969 = 100) increased substantially from 86.5 in 1993 to 95.1 in 1997, that is, at a rate of 2.4 per cent a year. Capacity output grew at an average annual rate of only 0.17 per cent. The greater part of the 2.55 per cent per annum increase in actual output in 1993-7, thus was apparently accounted for by increased capacity utilisation. In 1998, however, the increase in actual GDP was lower than the increase in potential output, due to a decline in capacity utilisation as the economy went into recession.
5
Measured in constant (1956/7) rands, the GDP share of mining declined from 24.0 per cent in 1916/17 to 11.1 per cent in 1956/7, while that of manufacturing increased from 6.2 per cent to 19.4 per cent. These figures, as well as export shares and growth rates in the period 1916/17-1956/7 have been calculated from data in constant (1956/7) rands from T. A. du Plessis (1965).
6
See also the prescient study by J. C. du Plessis (1965), at the time an economist at the South African Reserve Bank.
7
South Africa's REER is defined as equal to e·P/P*, where e is the trade-weighted nominal exchange rate, expressed as the number of units of foreign currency per rand, P is the South African producer price index (PPI), and P* is a trade-weighted measure of the PPIs of South Africa's trading partners.
8
That is, the increase in e was offset, indeed more than offset, by the increase in P*, defined now as the foreign currency price of such products, so that the real exchange rate applicable to them fell.
9
The export unit values are calculated from the IDC (1995) Sectoral Data series. The weights in these cases are the shares of the constituent subsectors of each category in the total exports of the category. Data availability does not allow calculation of these real exchange rates for years after 1993.
10
In keeping with the views of the Reynders Commission (1972), a new export incentive scheme was introduced in 1972. Also, under pressure from GATT and the IMF, quantitative restrictions were gradually relaxed in the period 1972-6. This was accompanied

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