The Cyclical Relationships Between South Africa's Net Capital Inflows and Fiscal and Monetary Policies

Sean J. Gossel and Nicholas Biekpe

Emerging Markets Finance and Trade, 2013, vol. 49, issue 2, 64-83

Abstract: This paper investigates the cyclical relationships between South Africa's post-liberalization net capital inflows and fiscal and monetary policies. Correlation analysis shows that the bulk of South Africa's capital inflows do not have a significant cyclical relationship with fiscal policy but have a procyclical and reactive cyclical relationship with monetary policy. Furthermore, causality analysis finds that fiscal policy reacts to monetary policy and capital flows, whereas capital flows react to monetary policy. Hence, these results suggest that South Africa's policymakers are in a better position to control the country's capital inflows using monetary policy than using fiscal policy.

Keywords: capital flows; cyclicality; fiscal and monetary policies (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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