African Journals Online
Studies in Economics and Econometrics

Volume 25, Issue 3, 2001
Abstracts

Empirical regularities in the growth of government
Dao, M.Q. 1-29

Abstract: Meltzer and Richard (1983) test a model developed earlier (1981) of the size of government using a Stone-Geary utility function and annual data for the United States. They find that the ratio of government spending for redistribution to aggregate income, and the share of aggregate income redistributed in cash, rise and fall with the ratio of mean to median income and the level of (median) income. Redistribution in kind--the provision of education, health care, fire protection, and other services--also rises and falls with the ratio of mean to median income, but it appears to be independent of the level of income. In this paper a model is tested which is more comprehensive than that developed by Meltzer and Richard in the sense that it incorporates exogenous factors such as the fraction of the population that is under 18 years of age and that which is 65 years of age and over, the total population itself, the degree of homogeneity in the population, and most importantly, the use of per capita income in place of the level of median income to test "Wagner's (1958) law". Time-series data for the United States and for Canada as well as cross-section data for the United States and for OECD countries are used. The replication of the tests of Meltzer and Richard's model using more recent data for the United States and for Canada indicates that while it may be theoretically sound the data do not seem to be consistent with their rational theory of the size of government. Since the coefficient estimates of the variables normally used in the public finance literature are volatile in terms of sign and magnitude, their interpretation is difficult and thus this study confirms the necessity of the development of a sound theory of the size and growth of government as a prerequisite for the robustness of regression results.


Investigating the relevance of supply-side factors for export-oriented investment
Behar, A. 31-55

Abstract: It is important to test the relevance of supply conditions - relative to demand or neutral conditions - for export-oriented investment (EOI). If supply-side factors are not more pertinent, costly measures in place to attract EOI to South Africa might have unintended consequences. Test results suggest supply-side variables are more important for foreign export-oriented investment and not more important for domestic export-oriented investment, but severe data constraints force the construction of crude EOI proxies for the tests. These constraints expose the need for better EOI information and research.


Possible implications of the price, cross-price and income elasticities of the demand for public road transport in the Cape Metropolitan Area - a co-integration analysis
Neubrech, S.E.Pienaar, W.J. 57-73

Abstract: This article provides an application of co-integration analysis within the context of public transport services in the Cape Metropolitan Area. The results of the study reveal the price, cross-price and income elasticity of demand for minibus taxi and public bus transport in the Cape Metropolitan Area. These empirically derived results have a number of implications for the present commuter transport subsidy system and the regulation of minibus taxis. Greater co-ordination between minibus taxi and public bus transport by means of a tender system is proposed.


Forecasting cyclical turning points by means of a probabilistic approach : some South African evidence
Cook, M.P.Smit, E.V.D.M. 75-104

Abstract: In this paper the effectiveness of "transplanting" a forecasting method based on a probabilistic approach is assessed in the South African context. The method utilises leading indicators in regression models, with a dichotomous response variable which assumes values of 0 or 1 to indicate business cycle expansion or contraction. The study closely replicates the work of Nazmi (1993) on turning point prediction. The results indicate an ability of the model to accurately forecast business cycle turning points in the 1980s. In the 1990s, the model displays a diminished capacity to forecast the turning points with acceptable accuracy. Leading indicators, in the South African experience, show reliable leading relationships with the composite coincident index over the period between 1970 and 1980 and thereafter this relationship weakens, impacting negatively on their forecasting ability.


Modelling exchange rates returns using a nested design model
Biekpe, N. 105-113

Abstract: This paper examines cross-country currency variations regarding using a "nested design model". It attempts to address the following three fundamental questions frequently asked by market practitioners. Is the market efficient? How significant is the variation of currencies volatility across countries? How significant is the risk premium in the currency market? The logic of these questions is that, if countries have similar trade policies, then they are likely to share common market risk factors. These factors could include, among others, a common risk shared by the various currencies. The study here compares the prediction power of two models. The first is by Levich (1978) and Frankel (1982). Wilkinson and Rogers (1973) motivated the second in the experimental design framework. In the model due to Wilkinson and Rogers (!973), we incorporated a time component into the model structure to yield what we term the nested design model (or nested exchange rate model). This model is then compared with a traditional exchange rate model. The daily spot and forward exchange rate data (in US dollar equivalence) from six developed countries were used in the study. The speculative returns and forward premium of both models were calculated. Evidence here suggests that the nested exchange rate model appears to be a better model.


A note on the Oman stock market and the problem of over-subscriptions
Al-Mawali, N.Wahid, A.N.M. 115-121

Abstract: In the primary stock market of Oman, new issues are sold at an arbitrary fixed price giving rise to the problem of over-subscriptions. This paper defines and explains the process of over-subscriptions and finds that it distorts the market and causes inefficiency. The paper concludes that in order to alleviate this problem, market forces should be allowed to operate freely and excess liquidity emanating from inordinate government soft loan should be controlled.