December 2016 (4)
THIS PAPER INVESTIAGES the spill-over effects of South Africa’s economic growth on the Common Monetary Area (CMA). It uses simple correlation analysis and panel data econometric techniques (Fixed Effects, Difference and System Generalised Methods of Moments and Panel Vector Autoregression). The findings reveal that even though South Africa is closely linked with the Lesotho, Namibia and Swaziland (LNS) countries through trade, financial and institutional linkages, economic growth in South Africa does not appear to have a significant spill-over effects on the CMA. However, a simple correlation analysis shows that there is indeed a statistically significant positive relationship between economic growth in South Africa and economic growth in the CMA region, implying that a slowdown in SA economic growth is likely to have negative implications on the CMA.
THE PROLIFIC USE of mobile telephones in developing countries has given birth to financial innovations such as mobile money. As a result, the use of mobile money has expanded the grid of financial services to include previously unbanked populations in Africa. This development is a harbinger for increased financial intermediation and positive spill-overs in terms of credit growth to entrepreneurs and faster economic growth. Based on monthly data for the period 2013m7 – 2015m12, this study employs time series techniques to unpack the proliferation of mobile money and its attendant impact on financial inclusion in Lesotho. The findings reveal existence of long-run steady state relationship between financial inclusion and mobile money in Lesotho and that mobile money Granger causes financial inclusion both in the short-run and long-run in Lesotho. Therefore, financial inclusion policies should be directed towards leveling the playing ground for mobile money to flourish to create a more financially inclusive society in Lesotho.
THIS PAPER BUILDS on previous work by the Central Bank of Lesotho to estimate Lesotho’s yield curve. Its purpose is to contribute to capital market development goals by helping encourage corporate bond issuances, improving pricing of financial products, and providing guidance as to yields that will be achieved at government bond auctions. Since South African zero-coupon yields are available on a daily basis, the model developed in this paper harnesses this information to estimate Lesotho’s zero-coupon yield curve at any date. The model performs well as measured by both in-sample and out-of-sample testing, producing negligible bias.
THE LIBERALIZATION of exchange control regulations by the Common Monetary Area (CMA) countries and Lesotho in particular, is a commendable milestone though there is still a long way towards full liberalization. As indicated in the National Strategic Development Plan (NSDP) for 2012/13-2016/17, it is part of the Government of Lesotho's (GoL's) strategy to encourage cross border trade and for the country to operate as a liberal open economy. In a nutshell, the study reveals that the CMA countries are at par in terms of exchange control liberalization on a number of transactions. However, South Africa (SA) is the most liberalized within the region and this is mainly attributable to the fact that it is more developed and, also has more developed capital and financial market compared to the rest of the CMA member countries. In a number of transactions, Lesotho is more or less liberalized than Namibia and Swaziland, however, in such instances - the gap is narrow.