ABSTRACT

This paper assesses the degree of financial integration between South Africa and the United States of America to infer South African’s financial integration into the world economy. The analysis is based on the covered interest parity whereby the mean reverting property of the covered interest differential, and the long-run equilibrium of the variables that constitute the covered interest parity, are examined. The paper finds that covered interest difference is mean reverting and its absolute mean decreases progressively during different periods of the analysis. This finding supports an increasing degree of South Africa’s financial integration into the world economy from 1993 to 2008.