Trade Intensity Analysis of South Africa - Bric Economic Relations

Abstract

The study broadly focused on examining the trade and investment relationship between South Africa and the BRIC, using both descriptive and vector autoregressive estimation approaches. Specifically, the key objective is to investigate the impact of trade shocks between South Africa and the individual countries of the BRIC bloc. The findings illustrate that South Africa’s trade was more intense with India in the review period followed by trade with China. The impulse-response outcome showed that South Africa’s GDP reverts faster to equilibrium in the event of a shock in exports to and imports from Brazil. Also, when there is a shock to GDP, South Africa’s imports from Brazil reverts faster to equilibrium. The results of the variance decomposition indicate that inflation accounted for the highest variation in South Africa’s exports to and imports from both Brazil and China. Similarly, inflation explained the greatest variation in the GDP, while the greatest variation in the domestic inflation rate is explained by its own shock. In conclusion, South Africa showed considerable trade intensity with most BRIC Countries. In policy terms, this implies that South Africa can benefit substantially from policies targeted at broadening the scope of its international trade connections with the BRIC bloc with particular emphasis on Brazil and China.

Keywords: Trade Flows, Impulse Response, Variance Decomposition, BRIC, South Africa