Macroeconomic Variables and Political Stability in Financial Conditions after the 2008 Crisis and during the COVID-19 Pandemic

Thomas Habanabakize, Zandri Dickason-Koekemoer


The period between the 2008-2009 financial crisis and the advent of the COVID-19 pandemic was characterized by severe fluctuations in economic and financial conditions and political instability that had an austere impact on the South African economy. Given the existing mutual causality between financial conditions and the country’s macroeconomic variables, the current study aimed to analyze the impact of employment, economic growth, exports, and political stability on the dynamics of financial conditions between the 2008-2009 financial crisis and COVID-19. To achieve this objective, the autoregressive distributed lag (ARDL), bound test, error correction model (ECM), and Toda– Yamamoto (T-Y) causality approach were applied to data time series from 2008 to 2019. Findings indicated a linear relationship between selected macroeconomic variables, political risk, and the financial condition index in South Africa for both the long-run and short-run. T-Y results also suggested unidirectional causation between the financial condition index and explanatory variables. These results are useful in economic and financial policymaking. This study is unique, as the topic was not previously researched. Given that a co-integration exists between the analyzed variables, policymakers should consider the interaction between political, financial and economic stabilities when making crucial decisions in each of these sectors.   


Keywords: employment, economic growth, exports, political risk, financial conditions, South Africa.



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