Input cost and international demand effects on the production of platinum group metals in South Africa

highlights
• The impulse responses show that shocks to the international factors negatively affect production while domestic shocks positively affect production.
• The variance decompositions find that in the long-run, production is most significantly impacted by international demand, domestic electricity tariffs, and salary shocks.
• The block Granger causality analysis finds that the international factors causally affect the domestic factors, but production is driven by PGM price fluctuations, electricity tariffs, and output per employee.

This study uses a VECM with impulse response, variance decomposition and block Granger causality analysis to investigate the effects of international and domestic factors on the production of platinum group metals (PGM) in South Africa from 1980 to 2011. The results of the impulse responses show that shocks to the international factors negatively affect production while domestic shocks positively affect production. The variance decompositions find that in the long-run, production is most significantly impacted by international demand, domestic electricity tariffs, and salary shocks. The block Granger causality analysis further finds that the international factors causally affect the domestic factors, but production is driven by PGM price fluctuations, electricity tariffs, and output per employee.