Abstract
Consumption expenditure contributed a total of 2.2% to economic growth in 2017. Hence, the South African economy is consumption driven. Therefore, there is a need to understand the growth-economic confidence relationship within the South African context. In this spirit, this paper set to explore the short- and long-run relationship between consumer confidence and economic growth in South Africa for the sample period 1994Q1 to 2017Q4. The method applied, chiefly because our variables were I (0) and I (1) and that we sought short- and long-run estimates were the Autoregressive Distributed Lag (ARDL) model using the bounds testing procedure. The results showed that consumer confidence contributed about 0.025% to economic growth in the short-run, and about 0.4% in the long-run. The results suggest that boosting consumer confidence should be keys for South African policy-makers to boost growth in the short- and long-run. In particular, we recommend policy certainty and political stability as some of the ways to attract consumer confidence.
Highlights
South Africa’s economic growth has been sluggish and discomforting since the 2008 crisis
The results showed that consumer confidence contributed about 0.025% to economic growth in the short-run, and about 0.4% in the long-run
The results suggest that boosting consumer confidence should be keys for South African policy-makers to boost growth in the short- and longrun
Summary
South Africa’s economic growth has been sluggish and discomforting since the 2008 crisis. Studies (for example, see: Maduku and Kaseeram (2018)) found that economic growth is a determinant of Foreign Direct Investment (FDI) in South Africa, suggesting that low growth is responsible for the downward trend in FDI that the country has been experiencing. Such low growth over years has not been a problem only for the South African economy, and its citizens (Harmse, 2006). The South African government aspires to achieve 5% growth rate in order to significantly reduce the high unemployment rate and tackle inequality. The government has sought many avenues through which to achieve high and sustainable economic growth, with the attraction of FDI the most favoured approach
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