Adjustment of commercial bank's interest rates and the effectiveness of monetary policy in South Africa
- Aziakpono, Meshach J, Wilson, Magdalene K, Manuel, Jason
- Authors: Aziakpono, Meshach J , Wilson, Magdalene K , Manuel, Jason
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469676 , vital:77277 , https://hdl.handle.net/10520/EJC33833
- Description: The study uses the asymmetric error correction model as in Scholnick (1996) and two wholesale bank interest rates (prime interbank lending and the negotiable certificate of deposit rates), to examine how market interest rates adjust to changes in the SARB official rate under different policy regimes in South Africa. The study covered the period between 1973 and 2004, which was divided into six sub-periods to reflect the different monetary policy regimes in South Africa. The results indicate a varying degree of adjustment under the different regimes, but clearly show that there was greater speed of adjustment under regimes that stress more market-oriented policies as opposed to control measures. The response of market Interest rates to monetary policy was quick and with high magnitude which suggest a fairly efficient money market. The evidence on the asymmetric adjustment was weak. On the whole, the results of this study suggest that a market-oriented policy would be more effective in transmitting the effects of the Bank's monetary policy stance to the rest of the economy.
- Full Text:
- Date Issued: 2007
- Authors: Aziakpono, Meshach J , Wilson, Magdalene K , Manuel, Jason
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469676 , vital:77277 , https://hdl.handle.net/10520/EJC33833
- Description: The study uses the asymmetric error correction model as in Scholnick (1996) and two wholesale bank interest rates (prime interbank lending and the negotiable certificate of deposit rates), to examine how market interest rates adjust to changes in the SARB official rate under different policy regimes in South Africa. The study covered the period between 1973 and 2004, which was divided into six sub-periods to reflect the different monetary policy regimes in South Africa. The results indicate a varying degree of adjustment under the different regimes, but clearly show that there was greater speed of adjustment under regimes that stress more market-oriented policies as opposed to control measures. The response of market Interest rates to monetary policy was quick and with high magnitude which suggest a fairly efficient money market. The evidence on the asymmetric adjustment was weak. On the whole, the results of this study suggest that a market-oriented policy would be more effective in transmitting the effects of the Bank's monetary policy stance to the rest of the economy.
- Full Text:
- Date Issued: 2007
Effects of financial integration on financial development and economic performance of the SACU countries
- Authors: Aziakpono, Meshach J
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , conference paper
- Identifier: http://hdl.handle.net/10962/469944 , vital:77309 , ISBN
- Description: This paper examines the effects of financial integration on financial development and economic performance of the SACU countries within a country-specific framework. The paper employs four measures of financial integration, two measures of financial development and real per capita output and annual time series from 1970 to 2004 for the analysis. The econometric analyses were carried out using the Johansen cointegration and error correction modelling techniques. The effects of financial integration were mixed, but what is apparent is that countries that are more integrated to South Africa produce more discernible evidence of positive effects of financial integration. The paper attributes the weak gains from the official integration arrangement to weak institutional and structural impediments in the countries.
- Full Text:
- Date Issued: 2007
- Authors: Aziakpono, Meshach J
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , conference paper
- Identifier: http://hdl.handle.net/10962/469944 , vital:77309 , ISBN
- Description: This paper examines the effects of financial integration on financial development and economic performance of the SACU countries within a country-specific framework. The paper employs four measures of financial integration, two measures of financial development and real per capita output and annual time series from 1970 to 2004 for the analysis. The econometric analyses were carried out using the Johansen cointegration and error correction modelling techniques. The effects of financial integration were mixed, but what is apparent is that countries that are more integrated to South Africa produce more discernible evidence of positive effects of financial integration. The paper attributes the weak gains from the official integration arrangement to weak institutional and structural impediments in the countries.
- Full Text:
- Date Issued: 2007
Forecasting recession in South Africa: A comparison of the yield curve and other economic indicators
- Khomo, Melvin M, Aziakpono, Meshach J
- Authors: Khomo, Melvin M , Aziakpono, Meshach J
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469775 , vital:77293 , https://doi.org/10.1111/j.1813-6982.2007.00117.x
- Description: The paper uses the standard probit model proposed by Estrella and Mishkin (1996), as well as the modified probit model suggested by Dueker (1997), to examine the ability of the yield curve to predict recessions in South Africa, and compares its predictive power with other commonly used variables such as the growth rate of real money supply, changes in stock prices and the index of leading economic indicators. Compared with other indicators, real M3 growth does not provide much information about future recessions, whilst movements in the All‐Share index provide information for up to 12 months but do not do better than the yield curve. The index of leading economic indicators outperforms the yield spread in the short run up to 4 months but the yield spread performs better at longer horizons.
- Full Text:
- Date Issued: 2007
Forecasting recession in South Africa: A comparison of the yield curve and other economic indicators
- Authors: Khomo, Melvin M , Aziakpono, Meshach J
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469775 , vital:77293 , https://doi.org/10.1111/j.1813-6982.2007.00117.x
- Description: The paper uses the standard probit model proposed by Estrella and Mishkin (1996), as well as the modified probit model suggested by Dueker (1997), to examine the ability of the yield curve to predict recessions in South Africa, and compares its predictive power with other commonly used variables such as the growth rate of real money supply, changes in stock prices and the index of leading economic indicators. Compared with other indicators, real M3 growth does not provide much information about future recessions, whilst movements in the All‐Share index provide information for up to 12 months but do not do better than the yield curve. The index of leading economic indicators outperforms the yield spread in the short run up to 4 months but the yield spread performs better at longer horizons.
- Full Text:
- Date Issued: 2007
Inflation targeting and the Fisher effect in South Africa: An empirical investigation
- Mitchell-Innes, Henry A, Aziakpono, Meshach J, Faure, Alexander P
- Authors: Mitchell-Innes, Henry A , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469786 , vital:77294 , https://doi.org/10.1111/j.1813-6982.2007.00143.x
- Description: The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, i.e. from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one‐to‐one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short‐run Fisher effect and a long‐run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short‐run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short‐term interest rates and the effects of the monetary transmission mechanism. The long‐run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long‐term interest rate. This suggests that monetary policy has an influence on the real long-term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework.
- Full Text:
- Date Issued: 2007
- Authors: Mitchell-Innes, Henry A , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469786 , vital:77294 , https://doi.org/10.1111/j.1813-6982.2007.00143.x
- Description: The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, i.e. from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one‐to‐one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short‐run Fisher effect and a long‐run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short‐run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short‐term interest rates and the effects of the monetary transmission mechanism. The long‐run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long‐term interest rate. This suggests that monetary policy has an influence on the real long-term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework.
- Full Text:
- Date Issued: 2007
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