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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Political uncertainty and private investment in South Africa
Author:Bleaney, M.F.ISNI
Periodical:South African Journal of Economics
Geographic term:South Africa
Subjects:political stability
Abstract:This article tests whether private business fixed investment in South Africa is sensitive to political uncertainty, and if so, whether investment is permanently lost or merely postponed. A model of the determinants of private fixed investment is estimated on thirty years of annual data from 1961 to 1990. This model suggests that two broad sets of factors have influenced the rate of investment: a) relative prices, in the form of the terms of trade and the mark-up of gold prices over production costs, and b) political uncertainty, which is measured here by the pressure of capital flows across the exchanges. Neither the cost of borrowing nor the relative price of capital investment seem to have been a significant determinant of real private investment, but there is a positive correlation with output. The results suggest that an increase in political uncertainty or a fall in the profitability of gold production permanently reduces investments, whereas much of the impact of a change in the terms of trade is temporary. Bibliogr., notes, ref.