Socially responsible investment and macroeconomic stability in south africa: an application of Vector Error Correction Model
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Date
Authors
Muzindutsi, Paul F.
Sekhampu, Tshediso J.
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Publisher
Clute Institute [for academic research]
Abstract
The study reported in this article investigated the relationship between the Social Responsible Investment (SRI) sector and macroeconomic stability in South Africa. Johansen co-integration approach and Vector Error Correction Model (VECM) were employed to test the relationship between SRI Index and a set of macroeconomic stability variables (inflation, real exchange rate, interest rates and money supply). Secondary data for the period April 2004 to December 2012 was analysed. There was a long-run association between all the variables during the period under consideration. However, the inflation rate, real effective exchange rate and money supply were not significant in predicting short-run changes in the SRI Index. A significant short-run relationship between SRI Index and the difference between long term and short-term interest rates (term structure) was observed. Macroeconomic variables are significant in explaining the behavior of the South African SRI sector in the long-run.
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Citation
Muzindutsi, P-F. & Sekhampu, T.J. 2013. Socially responsible investment and macroeconomic stability in South Africa: an application of Vector Error Correction Model. Journal of applied business research, 29(6):1623-1630. [http://journals.cluteonline.com/index.php/JABR]