Advertisement

Alternative Cycle Indicators for the South African Business Cycle

  • Willem H. BoshoffEmail author
  • Laurie H. Binge
Chapter
Part of the Societies and Political Orders in Transition book series (SOCPOT)

Abstract

The South African Reserve Bank’s composite coincident and leading indicators are key inputs in the bank’s elaborate process for identifying business cycle turning points in South Africa. This data-intensive process has drawback, in that there is a significant delay in both the publication of the indicators and in the determination of the official turning points. We show that business confidence indicators (BCIs), published by both the Bureau for Economic Research (BER) at Stellenbosch University and the South African Chamber of Commerce and Industry (SACCI), can be useful, timely and robust indicators of the South African business cycle. The two BCIs, and the BER BCI in particular, are useful leading indicators of turning points in the South African business cycle and track the official business cycle relatively closely, while they are published before the official series and are not subject to revision. The BCIs also contain relevant information for the prediction of output growth. We also review a recession-prediction algorithm of the BER, relying on six variables (including the BER BCI), which has proven successful at dating South African business cycle recessions.

Keywords

Business cycles Business confidence Sentiment Leading indicators Turning points 

References

  1. Bachmann R, Elstner S, Sims ER (2013) Uncertainty and economic activity: evidence from business survey data. Am Econ J Macroecon 5(2):217–249CrossRefGoogle Scholar
  2. Barsky RB, Sims ER (2012) Information, animal spirits, and the meaning of innovations in consumer confidence. Am Econ Rev 102(4):1343–1377.  https://doi.org/10.1257/aer.102.4.1343CrossRefGoogle Scholar
  3. Bosch A, Ruch F (2013) An alternative business cycle dating procedure for South Africa. South Afr J Econ 81(267):491–516CrossRefGoogle Scholar
  4. Boshoff WH (2005) The properties of cycles in South African financial variables and their relation to the business cycle. South Afr J Econ 73(4):694–709.  https://doi.org/10.1111/j.1813-6982.2005.00047.xCrossRefGoogle Scholar
  5. Botha F, Keeton G (2014) A note on the (continued) ability of the yield curve to forecast economic downturns in South Africa. South Afr J Econ 82(3):468–473.  https://doi.org/10.1111/saje.12053CrossRefGoogle Scholar
  6. Clay R, Keeton G (2011) The South African yield curve as a predictor of economic downturns: an update. Afr Rev Econ Financ 2(2):167–193Google Scholar
  7. Du Plessis S (2006) Reconsidering the business cycle and stabilisation policies in South Africa. Econ Model 23(5):761–774.  https://doi.org/10.1016/j.econmod.2005.10.006CrossRefGoogle Scholar
  8. ECB (2013) Confidence indicators and economic developments. ECB Mon Bull:45–58Google Scholar
  9. Gayer C, Girardi A, Reuter A (2014) The role of survey data in nowcasting euro area GDP growth. European Commission Economic Papers 538.  https://doi.org/10.2765/71951
  10. Gupta R, Kabundi A (2011) A large factor model for forecasting macroeconomic variables in South Africa. Int J Forecast 27(4):1076–1088.  https://doi.org/10.1016/j.ijforecast.2010.10.001CrossRefGoogle Scholar
  11. Harding D, Pagan A (2002) Dissecting the cycle: a methodological investigation. J Monet Econ 49(2):365–381.  https://doi.org/10.1016/S0304-3932(01)00108-8CrossRefGoogle Scholar
  12. Kabundi A, Nel E, Ruch F (2016) Nowcasting real GDP growth in South Africa. ERSA Working Paper. (581). Available: http://www.econrsa.org/system/files/publications/working_papers/working_paper_581.pdf
  13. Kershoff G (2000) Measuring business and consumer confidence in South Africa. Bur Econ Res:1–11Google Scholar
  14. Khomo MM, Aziakpono MJ (2007) Forecasting recession in South Africa: a comparison of the yield curve and other economic indicators. South Afr J Econ 75(2):194–212.  https://doi.org/10.1111/j.1813-6982.2007.00117.xCrossRefGoogle Scholar
  15. Laubscher P (2014) A new recession-dating algorithm for South Africa. Stellenbosch Economic Working Papers: 06/14Google Scholar
  16. Leduc S, Sill K (2013) Expectations and economic fluctuations: an analysis using survey data. Rev Econ Stat 95:1352–1367CrossRefGoogle Scholar
  17. Lehohla P, Morudu D (2011) Economic crises and forecasting: a review of South Africa’s model. Stat South Afr:1–15Google Scholar
  18. Moolman E (2003) Predicting turning points in the South African economy. South Afr J Econ Manag Sci 6(2):289–303Google Scholar
  19. Moolman E (2004) A Markov switching regime model of the South African business cycle. Econ Model 21:631–646.  https://doi.org/10.1016/j.econmod.2003.09.003CrossRefGoogle Scholar
  20. Redl C (2015) Macroeconomic uncertainty in South Africa. ERSA Working Paper 509Google Scholar
  21. SACCI (2011) Updated and revised SACCI business confidence index. South African chamber of commerce and industryGoogle Scholar
  22. Taylor K, McNabb R (2007) Business cycles and the role of confidence: evidence for Europe. Oxf Bull Econ Stat 69(2):185–208.  https://doi.org/10.1111/j.1468-0084.2007.00472.xCrossRefGoogle Scholar
  23. Van Der Walt BE, Pretorius WS (2004) Notes on revision of the composite business cycle indicators. South Afr Reserve Bank:29–35Google Scholar
  24. Venter JC (2005) A brief history of business cycle analysis in South Africa. In: Presentation to the OECD workshop on composite leading indicators for major OECD non-member economies, 2005Google Scholar

Copyright information

© Springer International Publishing AG, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsStellenbosch UniversityStellenboschSouth Africa

Personalised recommendations