The financial embargo of 1986--1991 on South Africa: Dynamic analysis

The structure of the main analysis of this thesis is to examine the effects of a financial embargo on the time path of the economic growth rate of South Africa. In this study I examine a simple open economy version of the Ramsey growth model. In addition, I undertake a linear intervention analysis to examine the effect of the financial embargo on the time path of the economic growth rate of South Africa. Based on both the theoretical and the empirical analyses, I conclude that the financial embargo of 1986-1991 on South Africa had a temporary negative effect on the time path of the economic growth rate of the country.; The thesis is extended to present a simple open economy version of Ramsey's model within a political context, taking into consideration the main elements of the apartheid system that was in effect in South Africa for a long time. This is in response to the question of the extent of the effectiveness of the international financial embargo in achieving its desired goal. This study concludes that there was an inverse relationship between the degrees of the response of the financial sanction as an international reaction to the human rights violations of the apartheid system on the one hand, and on the interest rate on the other. This provides a new interpretation for the outflow of capital from South Africa during the economic blockades. In line with the assumptions of the model, whites---the group with the capital---were the most affected by the blockade, with their income being directly affected by the imposition of the financial embargo. This indicates that the financial embargo was effective in achieving its desired goal, namely the exertion of pressure on the economic sector to lift the apartheid system. In addition, this analysis presents a simplified empirical study that concludes by reiterating the results of the theoretical study: that the multilateral financial embargo on South Africa was effective in achieving its desired goal.