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Threshold Analysis of the Stock Market Capitalization and Monetary Policy in South Africa: The Role of Investment in Artificial Intelligence

Author

Listed:
  • Opeyemi Aromolaran

    (School of Economics, College of Business and Economics, University of Johannesburg, South Africa)

  • Nicholas Ngepah

    (School of Economics, College of Business and Economics, University of Johannesburg, South Africa)

Abstract

This study investigates how repo rates and the nominal effective exchange rates affect stock market capitalization between 2016M1 and 2022M1, with a focus on the threshold level of investment in artificial intelligence. To analyze the data, econometrics techniques were employed. The Augmented Dickey-Fuller test confirmed that while market capitalization and repo rates became stationary after the first difference that of investments in artificial intelligence and the nominal effective exchange rates were stationary at level. A threshold model identified the threshold level of investment in artificial intelligence. The findings indicate that repo rates and the nominal effective exchange rates positively influence stock market capitalization when the threshold level of investment in artificial intelligence is below 7.7647. However, above the threshold, repo rates and the nominal effective exchange rates negatively affect stock market capitalization. This study concludes that the negative impact of the repo rates and the nominal effective exchange rates on stock market capitalization at higher levels of investment in artificial intelligence should be internalized through government subsidies that reduce the production cost of firms. However, the SARB should consistently manage the exchange rates from growing out of proportion.

Suggested Citation

  • Opeyemi Aromolaran & Nicholas Ngepah, 2024. "Threshold Analysis of the Stock Market Capitalization and Monetary Policy in South Africa: The Role of Investment in Artificial Intelligence," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 14(5), pages 18-25, September.
    • Handle: RePEc:eco:journ1:2024-05-3
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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