Financial sector reforms and investment efficiency in South Africa

  • Nicholas Odhiambo

Abstract

The effect of financial liberalization on investment in sub-Saharan Africa countries has drawn much attention in the recent literature. The major thrust of the literature has been to understand the mechanism by which interest rate deregulation on one hand and elimination of other forms of financial repression on the other hand; affect the quantity and quality of investment. This study attempts to empirically investigate the relevance of financial reforms on investment efficiency in South Africa using Johansen-Juselius cointegration method. Contrary to the results of other previous studies, the results of this study fail to find a robust positive relationship between real interest rates and investment efficiency in South Africa. The study therefore, concludes that positive real interest rates do not enhance the efficiency of investment in South Africa.

(Af. J. Finance and Management: 2002 11 (1): 68-79)
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