The effect of risk rating agencies decisions on economic growth and investment in a developing country: The case of South Africa
Autor: | Daniel Francois Meyer, Lerato Mothibi |
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Jazyk: | angličtina |
Rok vydání: | 2021 |
Předmět: |
050208 finance
Gross fixed capital formation Index (economics) 05 social sciences Government debt foreign direct investment Developing country Financial system Foreign direct investment sovereign risk rating Investment (macroeconomics) economic growth Credit rating South Africa HD61 0502 economics and business HG1-9999 Economics ddc:330 Risk in industry. Risk management 050207 economics autoregressive distributed lag Finance Credit risk |
Zdroj: | Journal of Risk and Financial Management, Vol 14, Iss 288, p 288 (2021) Journal of Risk and Financial Management Volume 14 Issue 7 |
Popis: | Over the last decade, the South African economy has endured prevailing economic challenges, including weak economic growth, unreliable electricity supply, rising fiscal deficits, declining investment inflows and the inexorable rise in government debt alongside the expected impact of the coronavirus pandemic. Credit ratings have significantly evolved, making them key elements in the modern financial markets because of their creditworthiness opinions, as many investors across the globe rely heavily on their opinions. A quantitative research approach was followed using data from 1994Q1 to 2020Q2. The analysis entailed a descriptive and econometric analysis where two models were estimated using the autoregressive distributed lag (ARDL) model. The findings reveal long-run relationships between economic growth (GDP), risk rating index, foreign direct investment (FDI), exchange rate, gross fixed capital formation and lending rates. The results also reveal a bi-directional causality between economic growth and the rating index and between FDI and the rating index. This study’s findings suggest that investments and economic growth in the country need to be stimulated significantly to impact risk rating agencies decisions. Policymakers need to redirect resources towards effective and efficient capital-forming initiatives and development projects to improve the country’s sovereign risk rating to re-ignite growth. |
Databáze: | OpenAIRE |
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