Exploring the role of energy, trade and financial development in explaining economic growth in South Africa: A revisit

Nanthakumar, Loganathan and Ronald Ravinesh, Kumar and Peter Josef, Stauvermann (2015) Exploring the role of energy, trade and financial development in explaining economic growth in South Africa: A revisit. Renewable and Sustainable Energy Reviews, 52. pp. 1300-1311. ISSN 13640321

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Abstract

South Africa is an emerging and industrializing economy which is experiencing remarkable progress. We contend that amidst the developments in the economy, the role of energy, trade openness and financial development are critical. In this article, we revisit the pivotal role of these factors. We use the ARDL bounds (Pesaran et al. 2001), the Bayer and Hank (2013) cointegration techniques, and an extended CobbDouglas framework, to examine the long-run association with output per worker over the sample period 1971-2011. The results support long-run association between output per worker, capital per worker and the shift parameters. The short-run elasticity coefficients are as follows: energy (0.24), trade (0.07), financial development (-0.03). In the long-run, the elasticity coefficients are: trade openness (0.05), energy (0.29), and financial development (-0.04). In both the short-run and the long-run, we note the post-2000 period has a marginal positive effect on the economy. The Toda and Yamamoto (1995) Granger causality results show that a unidirectional causality from capital stock and energy consumption to output; and from capital stock to trade openness; a bidirectional causality between trade openness and output; and absence (neutrality) of any causality between financial development and output thus indicating that these two variables evolve independent of each other.

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