| Summary: | The "global" financial crisis (GFC) emerged during 2008 and it was mainly triggered by
the sub-prime mortgage crisis (SMC) in the United States of America. The main aims of
this thesis is to conduct an econometric analysis of the financial crisis and household
savings in South Africa and also to provide a rationale that will facilitate a policy
attention on Domestic Resource Mobilisation (DRM) through household savings. The
study uses quarterly time series data for the period 199401 to 201102 obtained on-line
from the South African Reserve Bank (SARB). The research is based on the Keynesian
saving function, which is a complement of the consumption function. The model will be
estimated by using a cointegrating vector autoregressive (CVAR) framework, which
allows for endogeneity of the regressors. To check robustness on the cointegration
results, the study employs the second empirical technique based on Generalized
Impulse Response Function (GIRF) analysis and Variance Decomposition. The
regression equation of household savings is expressed as a function of household
disposable income, household debt to disposable income, real GOP, interest rate,
inflation rate and foreign savings.
The variables are tested for the presence of a unit root by the application of the
Augmented Dickey-Fuller (AOF), Phillips-Perron (PP) Kwiatkowski, Phillips, Schmidt
and Shin (KPSS) tests. The findings of the study are that all variables have unit roots.
The cointegration model emphasises the presence of a long run equilibrium relationship
between dependent and independent variables. The CVAR reveals the short run of the
dynamic household savings model. Taking this into consideration, the study concludes
that household debt has a huge influence on the level of household savings.
The econometric analysis also revealed that household savings in South Africa actually
improved during the period associated with the GFC. It could be postulated that South
African households responded to their deteriorating financial situations by reducing their
average spending and increasing their savings. Variance decomposition analysis
revealed that 'own shocks' constitute the predominant source of variations in household
saving therefore household savings can be explained by the disturbances in
macroeconomic variables in the study.
The study recommends the promotion of household savings and economic growth in
order to reduce the dependence of South Africa on foreign savings. DRM is therefore
enhanced by a higher level of household savings, which can facilitate higher levels of
investment and economic growth. === Thesis (PhD (Economics) North-West University, Mafikeng Campus, 2012
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