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South African Economic Policy under Democracy$
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Janine Aron, Brian Kahn, and Geeta Kingdon

Print publication date: 2009

Print ISBN-13: 9780199551460

Published to Oxford Scholarship Online: May 2009

DOI: 10.1093/acprof:oso/9780199551460.001.0001

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Capital Flows, Financial Markets, and the External Balance Sheet

Capital Flows, Financial Markets, and the External Balance Sheet

(p.118) 5 Capital Flows, Financial Markets, and the External Balance Sheet
South African Economic Policy under Democracy

Jonathan Leape

Lynne Thomas

Oxford University Press

This chapter examines the volume and composition of capital flows in South Africa, distinguishing between net flows of foreign (non-resident) capital and net flows of domestic (resident) capital. Two key themes are the response of investors to capital account liberalization and the role of domestic capital markets in influencing the composition of flows. Section 2 assesses exchange control reform in South Africa, emphasizing the gradual nature of the liberalization strategy and the priority given to macroeconomic and financial sector stability. Section 3 examines the composition of foreign capital inflows, in particular the high levels of inward portfolio investment supported by developed local capital markets. Section 4 focuses on outward investment by South African residents in the form of institutional investors, companies, and individuals. Section 5 concludes with an assessment of the implications of the changes in the financial account since 1994 for the external balance sheet and for macroeconomic policy.

Keywords:   South Africa, capital inflows, foreign capital, domestic capital, exchange control, foreign investment

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