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Roads Transport Infrastructure and Trade Facilitation in South Africa: The Monte-Carlo Simulation Approach

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  • Edward Kagiso Molefe

    (University of the Free State (RSA), Republic of South Africa)

  • Katleho Daniel Makatjane

    (Basetsana Consultants (RSA), Republic of South Africa)

Abstract

Trade facilitation is effectively linked to the capacity of existing transport infrastructure. Therefore, the development of transport related infrastructure plays a pivotal role in ensuring that this policy is fully implemented. The primary objective of this current study is to empirically examine the extreme effects of roads transport infrastructure on the implementation of trade facilitation policy (trade simplification and harmonization) in South Africa. This follows the fact that almost 90 per cent of cargo in South Africa and other SADC countries is transported using roads transport. The Threshold Vector Error Correction Model (TVECM) is adopted in this current study to estimate nonlinear effects of roads transport infrastructure on trade facilitation policy. Moreover, this study employs the Ali-Mikhail-Haq copulas and uses the residuals of the TVECM to predict the extreme dependence between roads transport infrastructure and trade facilitation. The results obtained in this study discovered that an estimated TVECM (1) was a good framework for interpreting the co-movement of roads transport infrastructure and trade facilitation in South Africa. The study concluded that roads transport infrastructure has extreme effects on trade facilitation since the correlation margins of the variables are extremely tight. Therefore, without proper roads transport infrastructure in place, trade simplification and harmonization as stipulated in the trade facilitation policy will remain a challenge in South Africa. This will also have a detrimental effects on imports and exports of South Africa since trading will continue to be time consuming and costly. Keywords: Government Infrastructure Development, Trade Facilitation, Threshold Vector Error Correction Model, South Africa

Suggested Citation

  • Edward Kagiso Molefe & Katleho Daniel Makatjane, 2020. "Roads Transport Infrastructure and Trade Facilitation in South Africa: The Monte-Carlo Simulation Approach," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(3), pages 130-139.
    • Handle: RePEc:ejn:ejefjr:v:8:y:2020:i:3:p:130-139
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    References listed on IDEAS

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    1. Kennedy K. Mbekeani, 2010. "Infrastructure, Trade Expansion and Regional Integration: Global Experience and Lessons for Africa-super- †," Journal of African Economies, Centre for the Study of African Economies, vol. 19(suppl_1), pages 88-113.
    2. Lo, Ming Chien & Zivot, Eric, 2001. "Threshold Cointegration And Nonlinear Adjustment To The Law Of One Price," Macroeconomic Dynamics, Cambridge University Press, vol. 5(4), pages 533-576, September.
    3. Terence Tai-Leung Chong & Yue Ding & Tianxiao Pang, 2017. "Extreme Risk Value and Dependence Structure of the China Securities Index 300," Economics Bulletin, AccessEcon, vol. 37(1), pages 520-529.
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