The effect of real exchange rate volatility on export performance: evidence from South Africa (2000-2011)
- Authors: Chamunorwa, Wilson
- Date: 2014
- Subjects: Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11499 , http://hdl.handle.net/10353/d1018600 , Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Description: The effect of real exchange rate volatility on export performance: evidence from South Africa (2000-2011) This study sought to investigate the relationship between exchange rate volatility and export performance in South Africa. The main objective of the study was to examine the impact of exchange rate volatility on export performance in South Africa. This relationship was examined using GARCH methods. Exports were regressed against real effective exchange rate, trade openness and capacity utilisation. The research aimed to establish whether exchange rate volatility impacts negatively on export performance in the manner suggested by the econometric model. The result obtained showed that exchange rate volatility had a significantly negative effect on South African exports in the period 2000-2011.
- Full Text:
- Date Issued: 2014
- Authors: Chamunorwa, Wilson
- Date: 2014
- Subjects: Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11499 , http://hdl.handle.net/10353/d1018600 , Monetary policy -- South Africa , Economic development -- South Africa , Foreign exchange rates -- South Africa
- Description: The effect of real exchange rate volatility on export performance: evidence from South Africa (2000-2011) This study sought to investigate the relationship between exchange rate volatility and export performance in South Africa. The main objective of the study was to examine the impact of exchange rate volatility on export performance in South Africa. This relationship was examined using GARCH methods. Exports were regressed against real effective exchange rate, trade openness and capacity utilisation. The research aimed to establish whether exchange rate volatility impacts negatively on export performance in the manner suggested by the econometric model. The result obtained showed that exchange rate volatility had a significantly negative effect on South African exports in the period 2000-2011.
- Full Text:
- Date Issued: 2014
Asset prices and inflation-targeting : implications for South Africa
- Authors: Cosser, Leigh Emma
- Date: 2005
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , South Africa -- Economic policy , Banks and banking, Central -- South Africa , Anti-inflationary policies , Monetary policy -- Japan , Monetary policy -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1127 , http://hdl.handle.net/10962/d1020849
- Description: An analysis of the current monetary policy framework in South Africa, which followed the exampie of a number of developed countries by implementing an inflation-targeting regime in 2000, is presented. The primary goal of the framework is to establish price stability, with financial stability a secondary objective. However, as has been evident in other countries, price stability does not guarantee financial stability. Movements in asset prices and the development of asset price bubbles have resulted in a number of episodes of financial instability, which negatively impacted on the growth and development of the countries involved. In addition, the majority of these episodes have occurred in periods of low and stable inflation. The dissertation analyses whether monetary policy would be more efficient if asset price movements were incorporated within the inflation-targeting regime. International experience indicates that early intervention of monetary policy can dampen the negative effects that result when an asset price bubble "bursts". However, if the monetary authorities act too early the effects on the economy can be just as disruptive. The literature is scrutinized to establish what the most effective form of monetary policy should be. The results are then transposed within the South African context to establish how the South African Reserve Bank can best ensure both price and financial stability.
- Full Text:
- Date Issued: 2005
- Authors: Cosser, Leigh Emma
- Date: 2005
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , South Africa -- Economic policy , Banks and banking, Central -- South Africa , Anti-inflationary policies , Monetary policy -- Japan , Monetary policy -- United States
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1127 , http://hdl.handle.net/10962/d1020849
- Description: An analysis of the current monetary policy framework in South Africa, which followed the exampie of a number of developed countries by implementing an inflation-targeting regime in 2000, is presented. The primary goal of the framework is to establish price stability, with financial stability a secondary objective. However, as has been evident in other countries, price stability does not guarantee financial stability. Movements in asset prices and the development of asset price bubbles have resulted in a number of episodes of financial instability, which negatively impacted on the growth and development of the countries involved. In addition, the majority of these episodes have occurred in periods of low and stable inflation. The dissertation analyses whether monetary policy would be more efficient if asset price movements were incorporated within the inflation-targeting regime. International experience indicates that early intervention of monetary policy can dampen the negative effects that result when an asset price bubble "bursts". However, if the monetary authorities act too early the effects on the economy can be just as disruptive. The literature is scrutinized to establish what the most effective form of monetary policy should be. The results are then transposed within the South African context to establish how the South African Reserve Bank can best ensure both price and financial stability.
- Full Text:
- Date Issued: 2005
Volatility transmission across South African financial markets: does the bull – bear distinction matter?
- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
- Full Text:
- Date Issued: 2011
- Authors: Jaramba, Toddy
- Date: 2011
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Monetary policy -- South Africa , Portfolio management -- South Africa , Stock exchanges -- South Africa , Foreign exchange -- Mathematical models , Bond market -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1106 , http://hdl.handle.net/10962/d1013396
- Description: The volatility transmission in financial markets has important implications for investment decision making, portfolio diversification and overall macroeconomic stability. This paper analyses volatility transmission across four South African financial markets that is the stock, bond, money and foreign exchange markets, using daily data for the period 2000-2010. It also shows whether the volatilities in the SA financial markets present a different behaviour in bull and bear market phases. The effects of the international markets volatility to the local markets volatility was also looked at in this study. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, EGARCH and TARCH. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated together with block exogeneity, impulse response and variance decomposition. The study found that there is limited volatility transmission across the SA financial markets. The study also found that the money market is the most exogenous of all markets since the other three financial markets volatility is insignificant to the money market (see impulse response results). For the bond market, volatility transmission was characterized with a decreasing trend. With regard to international markets volatility, it concluded that, the shocks in the international markets will eventually affect the movement in the local markets. The results also highlighted that, world and local markets are important in accelerating the volatility transmission in SA financial markets depending on whether they are in their bull or bear phases. In the case of South Africa, the study found that volatility transmission across markets is higher during bear market periods than bull market periods. Basing on the study results which show that the volatility transmission is limited across SA financial markets, the implication to local and international investors is that there is a greater potential for diversifying risk by investing in different South African financial markets.
- Full Text:
- Date Issued: 2011
Identifying the interdependence between South Africa's monetary policy and the stock market
- Authors: Muroyiwa, Brian
- Date: 2011
- Subjects: Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:982 , http://hdl.handle.net/10962/d1002716 , Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Description: This study estimates the interdependence between South Africa‟s monetary policy and stock market performance, utilising structural vector autoregression (SVAR) methodology. The study finds that a stock price shock which decrease stock prices by 100 basis points leads to 5 basis points decrease in interbank rate. A monetary policy shock that increases the interbank rate by l percent leads to decrease in real stock prices by 1 percent. This result for South Africa is similar to the result by Bjornland and Leteimo (2009) which earlier concluded that there was a high interdependence between interest rate setting and stock prices. However the magnitude of the relationship is relatively lower for South Africa compared to that of the United States of America (USA). The result of the current study is also very much consistent with the argument that the South African stock market is resource-based and so is influenced by external shocks, meaning monetary policy shock does not have as much impact on stock market in South Africa as in the USA. However the SARB may have to consider watching movements in stock prices so that booms in stock markets do not defeat central bank monetary policy thrusts. The stock price market is an essential source of information for monetary policy in South Africa.
- Full Text:
- Date Issued: 2011
- Authors: Muroyiwa, Brian
- Date: 2011
- Subjects: Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:982 , http://hdl.handle.net/10962/d1002716 , Monetary policy -- South Africa , Stock exchanges -- Law and legislation -- South Africa , Interest rates -- South Africa , Securities -- Prices -- South Africa
- Description: This study estimates the interdependence between South Africa‟s monetary policy and stock market performance, utilising structural vector autoregression (SVAR) methodology. The study finds that a stock price shock which decrease stock prices by 100 basis points leads to 5 basis points decrease in interbank rate. A monetary policy shock that increases the interbank rate by l percent leads to decrease in real stock prices by 1 percent. This result for South Africa is similar to the result by Bjornland and Leteimo (2009) which earlier concluded that there was a high interdependence between interest rate setting and stock prices. However the magnitude of the relationship is relatively lower for South Africa compared to that of the United States of America (USA). The result of the current study is also very much consistent with the argument that the South African stock market is resource-based and so is influenced by external shocks, meaning monetary policy shock does not have as much impact on stock market in South Africa as in the USA. However the SARB may have to consider watching movements in stock prices so that booms in stock markets do not defeat central bank monetary policy thrusts. The stock price market is an essential source of information for monetary policy in South Africa.
- Full Text:
- Date Issued: 2011
Monetary policy transmission in South Africa: the prime rate-demand for credit phase
- Authors: Lehobo, Limakatso
- Date: 2006
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Bank loans -- South Africa , Financial institutions -- South Africa , Finance -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1128 , http://hdl.handle.net/10962/d1020850
- Description: A voluminous literature attempts to explain the various channels of the monetary policy transmission mechanism through which central banks ultimately achieve price stability. However, most research focuses on interest rate pass-through and the demand for money phase, while there is limited research on the demand for credit. This study endeavours to contribute to the understanding of this neglected phase of monetary policy transmission by exploring the response of the real demand for bank credit by the private sector to changes in the real prime rate from 1990:1 to 2004:4 in South Africa. Firstly, the behaviour of the real prime rate in relation to the repo rate is explored using graphical analysis. The study observes that an increase in the repo rate causes an increase in the real prime rate, such that there is always a margin of three or four percentage points between the two rates. Secondly, using secondary data, the Johansen methodology is used to determine the relationship between the demand for bank credit and its determinants (GDP, inflation, real prime rate and real yield on government bonds). Two co-integrating relationships are found. The Gaussian errors from one co-integrating vector are used to model the Vector Error Correction Model, which provides the short-run dynamics and the long-run results, through the use of Eviews 5 software. The results of the study show that while all other variables are negatively related to the demand for bank credit in the long-run, GDP has a positive influence. In the short-run, yield on government bonds and inflation coefficients depict a positive association, while the coefficients of real prime rate and GDP are negative. The error correction coefficient is -0.32, which implies that a 32% adjustment to equilibrium happens in the demand for bank credit in a quarter and that the complete adjustment takes about three quarters to complete. Thirdly, the generalised impulse responses results indicate that the impact on the real prime rate affects the demand for bank credit from the first quarter. The study concludes that the real prime rate has a negative impact on the demand for credit both in the short-run and long-run.
- Full Text:
- Date Issued: 2006
- Authors: Lehobo, Limakatso
- Date: 2006
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Bank loans -- South Africa , Financial institutions -- South Africa , Finance -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1128 , http://hdl.handle.net/10962/d1020850
- Description: A voluminous literature attempts to explain the various channels of the monetary policy transmission mechanism through which central banks ultimately achieve price stability. However, most research focuses on interest rate pass-through and the demand for money phase, while there is limited research on the demand for credit. This study endeavours to contribute to the understanding of this neglected phase of monetary policy transmission by exploring the response of the real demand for bank credit by the private sector to changes in the real prime rate from 1990:1 to 2004:4 in South Africa. Firstly, the behaviour of the real prime rate in relation to the repo rate is explored using graphical analysis. The study observes that an increase in the repo rate causes an increase in the real prime rate, such that there is always a margin of three or four percentage points between the two rates. Secondly, using secondary data, the Johansen methodology is used to determine the relationship between the demand for bank credit and its determinants (GDP, inflation, real prime rate and real yield on government bonds). Two co-integrating relationships are found. The Gaussian errors from one co-integrating vector are used to model the Vector Error Correction Model, which provides the short-run dynamics and the long-run results, through the use of Eviews 5 software. The results of the study show that while all other variables are negatively related to the demand for bank credit in the long-run, GDP has a positive influence. In the short-run, yield on government bonds and inflation coefficients depict a positive association, while the coefficients of real prime rate and GDP are negative. The error correction coefficient is -0.32, which implies that a 32% adjustment to equilibrium happens in the demand for bank credit in a quarter and that the complete adjustment takes about three quarters to complete. Thirdly, the generalised impulse responses results indicate that the impact on the real prime rate affects the demand for bank credit from the first quarter. The study concludes that the real prime rate has a negative impact on the demand for credit both in the short-run and long-run.
- Full Text:
- Date Issued: 2006
An analysis of the money market linkages between South Africa and selected major world economies
- Authors: Barnor, Joel A
- Date: 2009
- Subjects: South African Reserve Bank , Banks and banking, Central -- South Africa , Money market -- South Africa , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , International economic relations , Interest rates -- South Africa , Financial institutions -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:956 , http://hdl.handle.net/10962/d1002690 , South African Reserve Bank , Banks and banking, Central -- South Africa , Money market -- South Africa , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , International economic relations , Interest rates -- South Africa , Financial institutions -- South Africa
- Description: Globalisation and financial liberalisation has increased the linkages across countries in recent times. The existence of money market links has important implications for both domestic monetary policy and for investment decisions. This study examines the linkages between South Africa’s money market and selected major international money markets. The objectives of the study are firstly to examine the links between the repo rate of South Africa and the central bank rates of the EU, Japan, UK and US. Secondly, is to compare the influence of domestic and foreign monetary policy decisions on South Africa’s money market. The third objective is to examine the long run relationship between the South African money market and the money markets of its major trading partners. Three estimation techniques are used to examine the different links. Principal components analysis, four tests of cointegration, and stationarity tests of the spreads/risk premium between South Africa’s interest rates and the interest rates of the other countries. All three techniques show that there is no long-run link between South Africa’s central bank rates and the central bank rates of the other countries. This shows that the repo rate does not depend on movements in other central bank rates. Domestic money market interest rates respond strongly to changes in the repo rate whilst showing no dependence on central bank rates of the other countries. This confirms the autonomy of the South African Reserve Bank in carrying out policy objectives. When the risk premium is accounted for under the third technique, evidence of integration is found. This indicates that the risk premium plays a crucial part in the level of integration between South Africa and the countries included in the study.
- Full Text:
- Date Issued: 2009
- Authors: Barnor, Joel A
- Date: 2009
- Subjects: South African Reserve Bank , Banks and banking, Central -- South Africa , Money market -- South Africa , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , International economic relations , Interest rates -- South Africa , Financial institutions -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:956 , http://hdl.handle.net/10962/d1002690 , South African Reserve Bank , Banks and banking, Central -- South Africa , Money market -- South Africa , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , International economic relations , Interest rates -- South Africa , Financial institutions -- South Africa
- Description: Globalisation and financial liberalisation has increased the linkages across countries in recent times. The existence of money market links has important implications for both domestic monetary policy and for investment decisions. This study examines the linkages between South Africa’s money market and selected major international money markets. The objectives of the study are firstly to examine the links between the repo rate of South Africa and the central bank rates of the EU, Japan, UK and US. Secondly, is to compare the influence of domestic and foreign monetary policy decisions on South Africa’s money market. The third objective is to examine the long run relationship between the South African money market and the money markets of its major trading partners. Three estimation techniques are used to examine the different links. Principal components analysis, four tests of cointegration, and stationarity tests of the spreads/risk premium between South Africa’s interest rates and the interest rates of the other countries. All three techniques show that there is no long-run link between South Africa’s central bank rates and the central bank rates of the other countries. This shows that the repo rate does not depend on movements in other central bank rates. Domestic money market interest rates respond strongly to changes in the repo rate whilst showing no dependence on central bank rates of the other countries. This confirms the autonomy of the South African Reserve Bank in carrying out policy objectives. When the risk premium is accounted for under the third technique, evidence of integration is found. This indicates that the risk premium plays a crucial part in the level of integration between South Africa and the countries included in the study.
- Full Text:
- Date Issued: 2009
Monetary policy transmission in South Africa: a comparative analysis of credit and exchange rate channels
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
- Full Text:
- Date Issued: 2011
- Authors: Sebitso, Nathaniel Maemu
- Date: 2011
- Subjects: Monetary policy -- South Africa , Foreign exchange market -- South Africa , Financial crises -- South Africa , South Africa -- Economic conditions , South Africa -- Economic policy , Banks and banking -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1129 , http://hdl.handle.net/10962/d1020851
- Description: This thesis focuses on monetary policy transmission and particularly seeks to examine the impact of credit and exchange rate channels of monetary policy transmission in the South African economy. South Africa's monetary policy has gone through several changes over the past thirty years. In this respect, there is a need for robust empirical evidence on the effects of these channels on inflation and output. The thesis employs a structural vector autoregressive (SVAR) model to identify monetary transmission in South Africa for the period 1994:q4 - 2008:q2. The form of the SVAR used in this thesis is based on the fact that South Africa is a small open economy, which means that external shocks are an important driver of domestic activity. The impulse responses and variance decomposition results show that the repo rate, credit and exchange rate play a role in terms of their impact on inflation and output. The dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the importance of the interest rate channel. A shock to the interest rate, increasing it by one standard deviation, results in a persistent fall in credit. The response of output is immediate as it falls and bottoms out within the second year. Inflation shows a lagged response, it is positive within the first year as the exchange rate depreciates but in subsequent quarters inflation responds negatively as expected. Inflation falls and reaches a minimum by approximately eight quarters then moves towards baseline. The exchange rate shows delayed appreciation. The shock to the repo interest rate leads to an immediate depreciation of the exchange rate in the first two quarters as output declines, followed by an appreciation in the third and sixth quarter. Due to larger error bounds the impact of the repo rate on the exchange rate could be less effective within the first two years. The impulse responses suggest that monetary policy plays an effective role in stabilising the economy in response to a credit shock, notwithstanding large standard error bounds. Hence, the monetary authority reacts by increasing the repo rate as a result of inflation. The impact of credit on output is positive but is offset to some extent by the rising repo rate. In response to the rand appreciation, the monetary authority reduces the repo rate significantly during the first year with the maximum impact in the second year and then returns to baseline thereafter. Therefore the monetary authority reduces the repo rate, probably to stabilise falling inflation. The result shows that inflation falls as a result of the rand appreciation. A shock to the exchange rate causes a rise in output, though small in magnitude, which is persistent but reaches baseline at the end of the period. This result could reflect the effects of the resultant fall in the repo rate and a persistent rise in credit over the whole period, which tends to increase output. The exchange rate shows an obvious and stronger immediate impact on inflation compared to credit impact on inflation. However, the credit shock has an obvious and stronger impact on output compared to an exchange rate impact on output. However, the large standard error bounds may imply that credit and exchange rate channels are not as effective in the short run. It is important to note that the results are based on the SVAR model estimated with percentage growth rate of the variables. The variance decomposition result is in line with the impulse responses and shows that the exchange rate and credit channels could be important transmission channels in South Africa over the chosen sample period. The exchange rate and credit shocks show a stronger effect on inflation than on output, looking at both the impulse responses and variance decomposition results. The reaction of the repo interest rate to the credit and exchange rate shocks comes out as expected. The repo rate increases as a result of an increase in the credit and falls as a result of the currency appreciation.
- Full Text:
- Date Issued: 2011
Financial liberalisation and economic growth in South Africa
- Sibanda, Hlanganani Siqondile.
- Authors: Sibanda, Hlanganani Siqondile.
- Date: 2012
- Subjects: Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11471 , http://hdl.handle.net/10353/d1007131 , Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Description: This study examined the impact of financial liberalisation on economic growth in South Africa. The study used quarterly time series data for the period 1980 to 2010. A vector error correction model was used to determine the short run and long run effects of financial liberalisation on economic growth in South Africa. The other explanatory variables considered in this study were government expenditure, investment ratio, public expenditure on education and trade openness. Results from this study revealed that financial liberalisation, government expenditure and public expenditure on education have a positive impact on economic growth while trade openness negatively affects economic growth in South Africa. Policy recommendations were made using these results.
- Full Text:
- Date Issued: 2012
- Authors: Sibanda, Hlanganani Siqondile.
- Date: 2012
- Subjects: Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11471 , http://hdl.handle.net/10353/d1007131 , Economic development -- South Africa , Monetary policy -- South Africa , Finance -- Management , Capital movements -- South Africa , Free trade -- South Africa , Expenditures, Public
- Description: This study examined the impact of financial liberalisation on economic growth in South Africa. The study used quarterly time series data for the period 1980 to 2010. A vector error correction model was used to determine the short run and long run effects of financial liberalisation on economic growth in South Africa. The other explanatory variables considered in this study were government expenditure, investment ratio, public expenditure on education and trade openness. Results from this study revealed that financial liberalisation, government expenditure and public expenditure on education have a positive impact on economic growth while trade openness negatively affects economic growth in South Africa. Policy recommendations were made using these results.
- Full Text:
- Date Issued: 2012
Dynamic linkages between monetary policy and the stock market: the case of South Africa
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
- Full Text:
- Date Issued: 2013
- Authors: Mabitle, Mope
- Date: 2013
- Subjects: Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11483 , http://hdl.handle.net/10353/d1015290 , Johannesburg Stock Exchange , South African Reserve Bank , Monetary policy -- South Africa
- Description: This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.
- Full Text:
- Date Issued: 2013
Money supply endogeneity : an empirical investigation of South African data (2000Q1-2011Q4)
- Authors: Schady, Stuart William
- Date: 2013 , 2013-04-29
- Subjects: Monetary policy -- South Africa , Inflation targeting -- South Africa , Gross domestic product -- South Africa , Bank loans -- South Africa , Money supply -- South Africa , Endogenous growth (Economics) , Domestic credit extension
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:928 , http://hdl.handle.net/10962/d1001454 , Monetary policy -- South Africa , Inflation targeting -- South Africa , Gross domestic product -- South Africa , Bank loans -- South Africa , Money supply -- South Africa , Endogenous growth (Economics)
- Description: This study is about whether the money supply in South Africa under a monetary policy regime of inflation‐targeting is exogenously or endogenously determined. The proposition of an exogenous money supply has been offered by monetarists, where the Central Bank determines the quantity of money supplied to the economy and this has a causal influence on income and credit extension. The endogenous money theory is a post‐Keynesian proposition whereby the money creation is determined by banks adjusting their responses to demands for credit‐money from economic agents. The data analysis is from 2000Q1 to 2010Q4 and entails the use of the variables monetary base (MB), domestic credit extension (DCE), M3, and gross national product (GDP). All variables are logged. The empirical tests conducted start with the Augmented Dickey‐Fuller unit root test to determine the variables order of integration. Johansen cointegration tests are done followed by Vector Error‐Correction Models (VECMs) and Granger causality tests to determine whether there is unidirectional or bidirectional causality between variables over the long and short‐run. Based on the results of the testing it was discovered that over the inflation‐targeting regime money supply in South Africa was endogenously determined. Furthermore, the data best supports the Accommodationist analysis of endogenous money as opposed to that of Structuralism and Liquidity Preference , Adobe Acrobat 9.53 Paper Capture Plug-in
- Full Text:
- Date Issued: 2013
- Authors: Schady, Stuart William
- Date: 2013 , 2013-04-29
- Subjects: Monetary policy -- South Africa , Inflation targeting -- South Africa , Gross domestic product -- South Africa , Bank loans -- South Africa , Money supply -- South Africa , Endogenous growth (Economics) , Domestic credit extension
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:928 , http://hdl.handle.net/10962/d1001454 , Monetary policy -- South Africa , Inflation targeting -- South Africa , Gross domestic product -- South Africa , Bank loans -- South Africa , Money supply -- South Africa , Endogenous growth (Economics)
- Description: This study is about whether the money supply in South Africa under a monetary policy regime of inflation‐targeting is exogenously or endogenously determined. The proposition of an exogenous money supply has been offered by monetarists, where the Central Bank determines the quantity of money supplied to the economy and this has a causal influence on income and credit extension. The endogenous money theory is a post‐Keynesian proposition whereby the money creation is determined by banks adjusting their responses to demands for credit‐money from economic agents. The data analysis is from 2000Q1 to 2010Q4 and entails the use of the variables monetary base (MB), domestic credit extension (DCE), M3, and gross national product (GDP). All variables are logged. The empirical tests conducted start with the Augmented Dickey‐Fuller unit root test to determine the variables order of integration. Johansen cointegration tests are done followed by Vector Error‐Correction Models (VECMs) and Granger causality tests to determine whether there is unidirectional or bidirectional causality between variables over the long and short‐run. Based on the results of the testing it was discovered that over the inflation‐targeting regime money supply in South Africa was endogenously determined. Furthermore, the data best supports the Accommodationist analysis of endogenous money as opposed to that of Structuralism and Liquidity Preference , Adobe Acrobat 9.53 Paper Capture Plug-in
- Full Text:
- Date Issued: 2013
Development of the South African monetary banking sector and money market
- Authors: Patel, Aadil Suleman
- Date: 2005
- Subjects: South African Reserve Bank , Banks and banking -- South Africa , Money market -- South Africa , Economic development -- South Africa , Monetary policy -- South Africa , South Africa -- Economic conditions , Financial institutions -- South Africa , Money -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:997 , http://hdl.handle.net/10962/d1002732 , South African Reserve Bank , Banks and banking -- South Africa , Money market -- South Africa , Economic development -- South Africa , Monetary policy -- South Africa , South Africa -- Economic conditions , Financial institutions -- South Africa , Money -- South Africa
- Description: This thesis presents a theoretical analysis of developments in the South African monetary banking sector and money market. In the first section, evolution of the political, social and economic environments over the past few decades are discussed to provide the reader with an idea of some factors responsible for the underdeveloped nature of this market. It has been argued that the domestic political and economic landscape is relatively stable. Nevertheless, factors such as Zimbabwe’s political and ensuing economic turmoil, coupled with numerous financial crises in other developing nations have had negative consequences on domestic financial market development and economic growth. The current state of monetary policy is also analysed, within the economic environment, and various policy considerations have been put forth concerning the inflation targeting policy. The thesis then goes on to scrutinise the statutory and institutional environments within which the monetary banking institutions operate. Recent changes in the regulations governing the operations of these institutions are identified, together with the consequences of such laws on banking institutions and possible amendments have been suggested. In particular, a system of Asset Based Reserve Requirements (ABRR) has been recommended, in place of the current cash reserve requirement, to ensure regulators create a level playing field in the financial sector. The system can also provide authorities with the necessary control required to direct funds to the most desirable sectors of the economy. Development of the interbank market and the effect of reduced banking competition on the efficacy of the South African Reserve Bank’s refinancing operations and inflation targeting policy are also considered. Finally, the thesis analyses some effects of financial development on the South African economy, and whether it is in the best interests of the country to pursue financial reforms with such vigour. While financial development may bring South Africa closer to international standards of best practice, the timing and extent of the reforms will be critical to guarantee success.
- Full Text:
- Date Issued: 2005
- Authors: Patel, Aadil Suleman
- Date: 2005
- Subjects: South African Reserve Bank , Banks and banking -- South Africa , Money market -- South Africa , Economic development -- South Africa , Monetary policy -- South Africa , South Africa -- Economic conditions , Financial institutions -- South Africa , Money -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:997 , http://hdl.handle.net/10962/d1002732 , South African Reserve Bank , Banks and banking -- South Africa , Money market -- South Africa , Economic development -- South Africa , Monetary policy -- South Africa , South Africa -- Economic conditions , Financial institutions -- South Africa , Money -- South Africa
- Description: This thesis presents a theoretical analysis of developments in the South African monetary banking sector and money market. In the first section, evolution of the political, social and economic environments over the past few decades are discussed to provide the reader with an idea of some factors responsible for the underdeveloped nature of this market. It has been argued that the domestic political and economic landscape is relatively stable. Nevertheless, factors such as Zimbabwe’s political and ensuing economic turmoil, coupled with numerous financial crises in other developing nations have had negative consequences on domestic financial market development and economic growth. The current state of monetary policy is also analysed, within the economic environment, and various policy considerations have been put forth concerning the inflation targeting policy. The thesis then goes on to scrutinise the statutory and institutional environments within which the monetary banking institutions operate. Recent changes in the regulations governing the operations of these institutions are identified, together with the consequences of such laws on banking institutions and possible amendments have been suggested. In particular, a system of Asset Based Reserve Requirements (ABRR) has been recommended, in place of the current cash reserve requirement, to ensure regulators create a level playing field in the financial sector. The system can also provide authorities with the necessary control required to direct funds to the most desirable sectors of the economy. Development of the interbank market and the effect of reduced banking competition on the efficacy of the South African Reserve Bank’s refinancing operations and inflation targeting policy are also considered. Finally, the thesis analyses some effects of financial development on the South African economy, and whether it is in the best interests of the country to pursue financial reforms with such vigour. While financial development may bring South Africa closer to international standards of best practice, the timing and extent of the reforms will be critical to guarantee success.
- Full Text:
- Date Issued: 2005
The exchange rate volatility and inflation rate in South Africa
- Authors: Milisi, Busisiwe
- Date: 2015
- Subjects: Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa
- Language: English
- Type: Thesis , Masters , MA
- Identifier: http://hdl.handle.net/10948/9151 , vital:26469
- Description: The study examines exchange rate volatility and inflation in South Africa over the period of 1987- 2012 using annual data. With the use of VAR, ADF unit root testing and Johansen for cointegration the study examines the relationship between exchange rate volatility and inflation in South Africa. The study also examines other variables, which are Money Supply, Trade Openness, Real Interest Rate and Real Gross Domestic Product (RGDP), if they had an impact on inflation and had contributed significantly to inflation during the period under review. All macroeconomic variables were identified to have an impact on inflation in the long-run. Exchange rate volatility was identified as the main variable that had substantial impact on inflation rate. The study recommended the current system used by the authorities was working well, as they can pursue a countercyclical macro policy, but also continue to manage the float by intervening to stabilize the exchange rate. The reason for this recommendation was that because one of the advantages of floating exchange rate is freeing internal policy, with a floating exchange rate, balance of payments disequilibrium would be rectified by a change in the external price of the currency. However, with a fixed rate, curing a deficit could involve a general deflationary policy resulting in unpleasant consequences for the whole economy such as unemployment.
- Full Text:
- Date Issued: 2015
- Authors: Milisi, Busisiwe
- Date: 2015
- Subjects: Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa
- Language: English
- Type: Thesis , Masters , MA
- Identifier: http://hdl.handle.net/10948/9151 , vital:26469
- Description: The study examines exchange rate volatility and inflation in South Africa over the period of 1987- 2012 using annual data. With the use of VAR, ADF unit root testing and Johansen for cointegration the study examines the relationship between exchange rate volatility and inflation in South Africa. The study also examines other variables, which are Money Supply, Trade Openness, Real Interest Rate and Real Gross Domestic Product (RGDP), if they had an impact on inflation and had contributed significantly to inflation during the period under review. All macroeconomic variables were identified to have an impact on inflation in the long-run. Exchange rate volatility was identified as the main variable that had substantial impact on inflation rate. The study recommended the current system used by the authorities was working well, as they can pursue a countercyclical macro policy, but also continue to manage the float by intervening to stabilize the exchange rate. The reason for this recommendation was that because one of the advantages of floating exchange rate is freeing internal policy, with a floating exchange rate, balance of payments disequilibrium would be rectified by a change in the external price of the currency. However, with a fixed rate, curing a deficit could involve a general deflationary policy resulting in unpleasant consequences for the whole economy such as unemployment.
- Full Text:
- Date Issued: 2015
A comparative analysis of the divisia index and the simple sum monetary aggregates for South Africa
- Authors: Moyo, Solomon Simbarashe
- Date: 2009
- Subjects: Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:945 , http://hdl.handle.net/10962/d1002679 , Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Description: The effectiveness of monetary policy in achieving its macroeconomic objectives such as price stability and economic growth depend on the monetary policy tools that are implemented by the Central Bank. Monetary aggregates are one of the tools that have been used as indicators of economic activity and as intermediate targets to achieve these economic objectives. Until recently, monetary aggregates have been questioned and criticised on their usefulness in monetary policy. This has been attributed to the economic, financial and technological developments that have distorted the relationship between monetary aggregates and major macroeconomic variables. This study investigates the relevance of monetary aggregation by comparing the traditional simple sum and Divisia index monetary aggregates which was constructed for the first time for South Africa using the Tornquist-Theil method. The Polynomial Distributed Lag model is employed to compare the performance of these monetary aggregates using their relationship with inflation and manufacturing index. Furthermore, the aggregates are compared in terms of their controllability and information content. Overall, the study found a very strong relationship between inflation and all the monetary aggregates. However, more specifically the results suggested that the Divisia indices are superior to the simple sum in terms of predicting inflation. The evidence further suggests that the Divisia aggregates provide higher information about inflation than the simple sum aggregates. Regarding the controllability of the monetary aggregates, the findings suggest that the monetary authorities can hardly control the monetary aggregates using monetary base. Finally, the relationship between manufacturing index and all the monetary aggregates was very weak.
- Full Text:
- Date Issued: 2009
- Authors: Moyo, Solomon Simbarashe
- Date: 2009
- Subjects: Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:945 , http://hdl.handle.net/10962/d1002679 , Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Description: The effectiveness of monetary policy in achieving its macroeconomic objectives such as price stability and economic growth depend on the monetary policy tools that are implemented by the Central Bank. Monetary aggregates are one of the tools that have been used as indicators of economic activity and as intermediate targets to achieve these economic objectives. Until recently, monetary aggregates have been questioned and criticised on their usefulness in monetary policy. This has been attributed to the economic, financial and technological developments that have distorted the relationship between monetary aggregates and major macroeconomic variables. This study investigates the relevance of monetary aggregation by comparing the traditional simple sum and Divisia index monetary aggregates which was constructed for the first time for South Africa using the Tornquist-Theil method. The Polynomial Distributed Lag model is employed to compare the performance of these monetary aggregates using their relationship with inflation and manufacturing index. Furthermore, the aggregates are compared in terms of their controllability and information content. Overall, the study found a very strong relationship between inflation and all the monetary aggregates. However, more specifically the results suggested that the Divisia indices are superior to the simple sum in terms of predicting inflation. The evidence further suggests that the Divisia aggregates provide higher information about inflation than the simple sum aggregates. Regarding the controllability of the monetary aggregates, the findings suggest that the monetary authorities can hardly control the monetary aggregates using monetary base. Finally, the relationship between manufacturing index and all the monetary aggregates was very weak.
- Full Text:
- Date Issued: 2009
The relationship between interest rates and inflation in South Africa : revisiting Fisher's hypothesis
- Mitchell-Innes, Henry Alexander
- Authors: Mitchell-Innes, Henry Alexander
- Date: 2006
- Subjects: Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:991 , http://hdl.handle.net/10962/d1002726 , Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Description: This thesis investigates the relationship between expected inflation and nominal interest rates in South Africa and the extent to which the Fisher effect hypothesis holds. The hypothesis, proposed by Fisher (1930), that the nominal rate of interest should reflect movements in the expected rate of inflation has been the subject of much empirical research in many industrialised countries. This wealth of literature can be attributed to various factors including the pivotal role that the nominal rate of interest and, perhaps more importantly, the real rate of interest plays in the economy. The validity of the Fisher effect also has important implications for monetary policy and needs to be considered by central banks. Few studies have been conducted in South Africa to validate this important hypothesis. The analysis uses the 3-month bankers’ acceptance rate and the 10-year government bond rate to proxy both short- and long-term interest rates. The existence of a long-run unit proportional relationship between nominal interest rates and expected inflation is tested using Johansen’s cointegration test. The data is analysed for the period April 2000 to July 2005 as the research aims to establish whether the Fisher relationship holds within an inflation targeting monetary policy framework. The short-run Fisher effect is not empirically verified. This is due to the effects of the monetary policy transmission mechanism and implies that short-term nominal interest rates are a good indication of the stance of monetary policy. A long-run cointegrating relationship is established between long-term interest rates and expected inflation. The long-run adjustment is less than unity, which can be attributed to the credibility of the inflation-targeting framework.
- Full Text:
- Date Issued: 2006
- Authors: Mitchell-Innes, Henry Alexander
- Date: 2006
- Subjects: Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:991 , http://hdl.handle.net/10962/d1002726 , Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Description: This thesis investigates the relationship between expected inflation and nominal interest rates in South Africa and the extent to which the Fisher effect hypothesis holds. The hypothesis, proposed by Fisher (1930), that the nominal rate of interest should reflect movements in the expected rate of inflation has been the subject of much empirical research in many industrialised countries. This wealth of literature can be attributed to various factors including the pivotal role that the nominal rate of interest and, perhaps more importantly, the real rate of interest plays in the economy. The validity of the Fisher effect also has important implications for monetary policy and needs to be considered by central banks. Few studies have been conducted in South Africa to validate this important hypothesis. The analysis uses the 3-month bankers’ acceptance rate and the 10-year government bond rate to proxy both short- and long-term interest rates. The existence of a long-run unit proportional relationship between nominal interest rates and expected inflation is tested using Johansen’s cointegration test. The data is analysed for the period April 2000 to July 2005 as the research aims to establish whether the Fisher relationship holds within an inflation targeting monetary policy framework. The short-run Fisher effect is not empirically verified. This is due to the effects of the monetary policy transmission mechanism and implies that short-term nominal interest rates are a good indication of the stance of monetary policy. A long-run cointegrating relationship is established between long-term interest rates and expected inflation. The long-run adjustment is less than unity, which can be attributed to the credibility of the inflation-targeting framework.
- Full Text:
- Date Issued: 2006
Interest rate behaviour in a more transparent South African monetary policy environment
- Authors: Ballim, Goolam Hoosen
- Date: 2005
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Interest rates -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1034 , http://hdl.handle.net/10962/d1004462 , South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Interest rates -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: South Africa introduced inflation targeting as a monetary policy framework in 2000. This marked a sizable shift in monetary policy management from the previous "eclectic" approach and the explicit focus on M3 money supply before that. The study appraises the effectiveness of monetary policy under this new dispensation. However, the analysis does not centre on inflation outcomes, which can be a measure of effectiveness because they are the overriding objective of the South African Reserve Bank in effect, it is possible to have a target-friendly inflation rate for a length of time despite monetary policy that is ambiguous and encourages unpredictability in market interest rates. However, persistent policy opaqueness can, over time, damage a favourable inflation scenario. For instance, if the public is unsure about the Reserve Bank's desired inflation target, price setting in the wage and goods markets may eventually produce an inflation outcome that is higher than the Bank may have intended. Rather, this study adjudicates the effectiveness of monetary policy within the context of policy transparency, which is an intrinsic part of the inflation targeting framework. The study looks at the extent to which monetary policy transparency has enhanced both the anticipatory nature of the market's response to policy actions and the force that policy has on all interest rates in the financial system, particularly long-term rates. These concepts are important because through the transmission mechanism of monetary policy, the more deft market participants are at anticipating future Reserve Bank policy the greater the Bank's ability to steady the economy before the actual policy event. With the aid of regression models to estimate the response of market rates to policy changes, the results show that there is significant movement in market rates in anticipation of policy action, rather than on the day of the event or the day after. Indeed, the estimates for market rates movement on the day of and even the day after the policy action are generally minute. For instance, the R157 long-term government bond yield changes by a significant 41 basis points in response to a one percentage point change in the Reserve Bank's benchmark repo rate in the period between the last policy action and the day preceding the current action. In contrast, the R157 bond yield changes by an insignificant 2 basis points on the day of the current repo rate change and about 1 basis point the day after the current change. The results point to a robust relationship between policy transparency and the market's ability to foresee rate action. If this were not the case, it is likely that there would be persistent market surprise and, hence, noticeable movement in interest rates on the day of the rate action and perhaps even the day after. Another important observation is that monetary policy impacts significantly on both short- and long-term market rates. Again, certifying the robustness of monetary policy under the inflation targeting regime
- Full Text:
- Date Issued: 2005
- Authors: Ballim, Goolam Hoosen
- Date: 2005
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Interest rates -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1034 , http://hdl.handle.net/10962/d1004462 , South African Reserve Bank , Monetary policy -- South Africa , Banks and banking -- South Africa , Interest rates -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: South Africa introduced inflation targeting as a monetary policy framework in 2000. This marked a sizable shift in monetary policy management from the previous "eclectic" approach and the explicit focus on M3 money supply before that. The study appraises the effectiveness of monetary policy under this new dispensation. However, the analysis does not centre on inflation outcomes, which can be a measure of effectiveness because they are the overriding objective of the South African Reserve Bank in effect, it is possible to have a target-friendly inflation rate for a length of time despite monetary policy that is ambiguous and encourages unpredictability in market interest rates. However, persistent policy opaqueness can, over time, damage a favourable inflation scenario. For instance, if the public is unsure about the Reserve Bank's desired inflation target, price setting in the wage and goods markets may eventually produce an inflation outcome that is higher than the Bank may have intended. Rather, this study adjudicates the effectiveness of monetary policy within the context of policy transparency, which is an intrinsic part of the inflation targeting framework. The study looks at the extent to which monetary policy transparency has enhanced both the anticipatory nature of the market's response to policy actions and the force that policy has on all interest rates in the financial system, particularly long-term rates. These concepts are important because through the transmission mechanism of monetary policy, the more deft market participants are at anticipating future Reserve Bank policy the greater the Bank's ability to steady the economy before the actual policy event. With the aid of regression models to estimate the response of market rates to policy changes, the results show that there is significant movement in market rates in anticipation of policy action, rather than on the day of the event or the day after. Indeed, the estimates for market rates movement on the day of and even the day after the policy action are generally minute. For instance, the R157 long-term government bond yield changes by a significant 41 basis points in response to a one percentage point change in the Reserve Bank's benchmark repo rate in the period between the last policy action and the day preceding the current action. In contrast, the R157 bond yield changes by an insignificant 2 basis points on the day of the current repo rate change and about 1 basis point the day after the current change. The results point to a robust relationship between policy transparency and the market's ability to foresee rate action. If this were not the case, it is likely that there would be persistent market surprise and, hence, noticeable movement in interest rates on the day of the rate action and perhaps even the day after. Another important observation is that monetary policy impacts significantly on both short- and long-term market rates. Again, certifying the robustness of monetary policy under the inflation targeting regime
- Full Text:
- Date Issued: 2005
Central Bank policy and the exchange rate under an inflation targeting regime: a case dtudy of South Africa
- Authors: Gonzo, Prosper
- Date: 2013
- Subjects: Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11476 , http://hdl.handle.net/10353/d1015043 , Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Description: This work examined the optimality of the inclusion of the exchange rate in the reaction function of the Central Bank in an inflation targeting framework. The study attempts to answer the question whether the exchange rate should have an independent role in an open economy Taylor-type rule. To this end, a Taylor-type rule is incorporating the exchange rate is estimated by the cointegration and vector error correction modeling (VECM) using quarterly data for the period of 1995 to 2009. The empirical studies point out the importance of the exchange rates in explaining and forecasting the behaviour of the South African Reserve Bank monetary policy control variable.
- Full Text:
- Date Issued: 2013
- Authors: Gonzo, Prosper
- Date: 2013
- Subjects: Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11476 , http://hdl.handle.net/10353/d1015043 , Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Description: This work examined the optimality of the inclusion of the exchange rate in the reaction function of the Central Bank in an inflation targeting framework. The study attempts to answer the question whether the exchange rate should have an independent role in an open economy Taylor-type rule. To this end, a Taylor-type rule is incorporating the exchange rate is estimated by the cointegration and vector error correction modeling (VECM) using quarterly data for the period of 1995 to 2009. The empirical studies point out the importance of the exchange rates in explaining and forecasting the behaviour of the South African Reserve Bank monetary policy control variable.
- Full Text:
- Date Issued: 2013
An analysis of exchange rate pass-through to prices in South Africa
- Authors: Karoro, Tapiwa Daniel
- Date: 2008
- Subjects: Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , Prices -- South Africa , Banks and banking -- South Africa , South Africa -- Economic policy
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:953 , http://hdl.handle.net/10962/d1002687 , Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , Prices -- South Africa , Banks and banking -- South Africa , South Africa -- Economic policy
- Description: The fact that South Africa has a floating exchange rate policy as well as an open trade policy leaves the country’s import, producer and consumer prices susceptible to the effects of exchange rate movements. Given the central role that inflation targeting occupies in South Africa’s monetary policy, it becomes necessary to determine the nature of influence of exchange rate changes on domestic prices. To this end, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to import, producer and consumer prices in South Africa. Furthermore, it explores whether the direction and size of changes in the exchange rate have different pass-through effects on import prices, that is, whether the exchange rate pass-through is symmetric or asymmetric. The paper uses monthly data covering the period January 1980 to December 2005. In investigating ERPT, two main stages are identified. The initial stage is the transmission of fluctuations in the exchange rate to import prices, while the second-stage entails the pass-through of changes in import prices to producer and consumer prices. The first stage is estimated using the Johansen (1991) and (1995) cointegration techniques and a vector error correction model (VECM). The second stage pass-through is determined by estimating impulse response and variance decomposition functions, as well as conducting block exogeneity Wald tests. The study follows Wickremasinghe and Silvapulle’s (2004) approach in estimating pass-through asymmetry with respect to appreciations and depreciations. In addition, the thesis adapts the analytical framework of Wickremasinghe and Silvapulle (2004) to investigate the pass-through of large and small changes in the exchange rate to import prices. The results suggest that ERPT in South Africa is incomplete but relatively high. Furthermore, ERPT is found to be higher in periods of rand depreciation than appreciation which supports the binding quantity constraint theory. There is also some evidence that pass-through is higher in periods of small changes than large changes in the exchange rate, which supports the menu cost theory when invoices are denominated in the exporters’ currency.
- Full Text:
- Date Issued: 2008
- Authors: Karoro, Tapiwa Daniel
- Date: 2008
- Subjects: Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , Prices -- South Africa , Banks and banking -- South Africa , South Africa -- Economic policy
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:953 , http://hdl.handle.net/10962/d1002687 , Foreign exchange rates -- South Africa , Monetary policy -- South Africa , Inflation (Finance) -- South Africa , Prices -- South Africa , Banks and banking -- South Africa , South Africa -- Economic policy
- Description: The fact that South Africa has a floating exchange rate policy as well as an open trade policy leaves the country’s import, producer and consumer prices susceptible to the effects of exchange rate movements. Given the central role that inflation targeting occupies in South Africa’s monetary policy, it becomes necessary to determine the nature of influence of exchange rate changes on domestic prices. To this end, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to import, producer and consumer prices in South Africa. Furthermore, it explores whether the direction and size of changes in the exchange rate have different pass-through effects on import prices, that is, whether the exchange rate pass-through is symmetric or asymmetric. The paper uses monthly data covering the period January 1980 to December 2005. In investigating ERPT, two main stages are identified. The initial stage is the transmission of fluctuations in the exchange rate to import prices, while the second-stage entails the pass-through of changes in import prices to producer and consumer prices. The first stage is estimated using the Johansen (1991) and (1995) cointegration techniques and a vector error correction model (VECM). The second stage pass-through is determined by estimating impulse response and variance decomposition functions, as well as conducting block exogeneity Wald tests. The study follows Wickremasinghe and Silvapulle’s (2004) approach in estimating pass-through asymmetry with respect to appreciations and depreciations. In addition, the thesis adapts the analytical framework of Wickremasinghe and Silvapulle (2004) to investigate the pass-through of large and small changes in the exchange rate to import prices. The results suggest that ERPT in South Africa is incomplete but relatively high. Furthermore, ERPT is found to be higher in periods of rand depreciation than appreciation which supports the binding quantity constraint theory. There is also some evidence that pass-through is higher in periods of small changes than large changes in the exchange rate, which supports the menu cost theory when invoices are denominated in the exporters’ currency.
- Full Text:
- Date Issued: 2008
Fiscal policy and unemployment in South Africa 1980 to 2010
- Authors: Murwirapachena, Genius
- Date: 2011
- Subjects: Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11458 , http://hdl.handle.net/10353/544 , Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Description: Unemployment is one of the greatest and most complex challenges facing South Africa. Just like most developing countries, South Africa has been using the fiscal policy framework as a tool to alleviate the high rates of unemployment. This study examined the impact of fiscal policy on unemployment in South Africa. The study used annual time series data for the period 1980 to 2010. A vector error correction model was used to determine the effects of fiscal policy aggregates on unemployment in South Africa. The fiscal policy aggregates considered in this study were government investment expenditure, government consumption expenditure and tax. Results from this study revealed that government consumption expenditure and tax have a positive impact on unemployment while government investment expenditure negatively affects unemployment in South Africa. Policy recommendations were made using these results.
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- Date Issued: 2011
- Authors: Murwirapachena, Genius
- Date: 2011
- Subjects: Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11458 , http://hdl.handle.net/10353/544 , Fiscal policy -- South Africa , Monetary policy -- South Africa , Labor economics -- South Africa , Unemployment -- South Africa , Labor policy -- South Africa
- Description: Unemployment is one of the greatest and most complex challenges facing South Africa. Just like most developing countries, South Africa has been using the fiscal policy framework as a tool to alleviate the high rates of unemployment. This study examined the impact of fiscal policy on unemployment in South Africa. The study used annual time series data for the period 1980 to 2010. A vector error correction model was used to determine the effects of fiscal policy aggregates on unemployment in South Africa. The fiscal policy aggregates considered in this study were government investment expenditure, government consumption expenditure and tax. Results from this study revealed that government consumption expenditure and tax have a positive impact on unemployment while government investment expenditure negatively affects unemployment in South Africa. Policy recommendations were made using these results.
- Full Text:
- Date Issued: 2011
The yield curve as a forecasting tool : does the yield spread predict recessions in South Africa?
- Authors: Khomo, Melvin Muzi
- Date: 2006
- Subjects: Recessions -- South Africa , Monetary policy -- South Africa , Economic development -- South Africa , Economic indicators -- South Africa , Business cycles -- History -- 20th century , Business cycles -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1040 , http://hdl.handle.net/10962/d1004722 , Recessions -- South Africa , Monetary policy -- South Africa , Economic development -- South Africa , Economic indicators -- South Africa , Business cycles -- History -- 20th century , Business cycles -- South Africa , South Africa -- Economic conditions
- Description: This paper examines the ability of the yield curve to predict recessions in South Africa, and compares its predictive power with other commonly used variables that include the growth rate in real money supply, changes in stock prices and the index of leading economic indicators. The study also makes an attempt to find out if monetary policy explains the yield spread's predictive power with regards to future economic activity. Regarding methodology, the standard probit model proposed by Estrella and Mishkin (1996) that directly estimates the probability of the economy going into recession is used. Results from this model are compared with a modified probit model suggested by Dueker (1997) that includes a lagged dependent variable. Results presented in the paper provide further evidence that the yield curve, as represented by the yield spread between 3-month and IO-year government paper, can be used to estimate the likelihood of recessions in South Africa. The yield spread can produce recession forecasts up to 18 months, although it's best predictive power is seen at two quarters. Results from the standard probit model and the modified pro bit model with a lagged dependent variable are somewhat similar, although the latter model improves forecasts at shorter horizons up to 3 months. Compared with other indicators, real M3 growth is a noisy indicator and does not provide much information about future recessions, whilst movements in the All-Share index can provide information for up to 12 months but does 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 spread performs better at longer horizons. Based on the results from the study, it appears that changes in monetary policy explain the yield spread's predictive power. This is because the yield spread loses its explanatory power when combined with a variable representing the monetary policy stance of the central bank.
- Full Text:
- Date Issued: 2006
- Authors: Khomo, Melvin Muzi
- Date: 2006
- Subjects: Recessions -- South Africa , Monetary policy -- South Africa , Economic development -- South Africa , Economic indicators -- South Africa , Business cycles -- History -- 20th century , Business cycles -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1040 , http://hdl.handle.net/10962/d1004722 , Recessions -- South Africa , Monetary policy -- South Africa , Economic development -- South Africa , Economic indicators -- South Africa , Business cycles -- History -- 20th century , Business cycles -- South Africa , South Africa -- Economic conditions
- Description: This paper examines the ability of the yield curve to predict recessions in South Africa, and compares its predictive power with other commonly used variables that include the growth rate in real money supply, changes in stock prices and the index of leading economic indicators. The study also makes an attempt to find out if monetary policy explains the yield spread's predictive power with regards to future economic activity. Regarding methodology, the standard probit model proposed by Estrella and Mishkin (1996) that directly estimates the probability of the economy going into recession is used. Results from this model are compared with a modified probit model suggested by Dueker (1997) that includes a lagged dependent variable. Results presented in the paper provide further evidence that the yield curve, as represented by the yield spread between 3-month and IO-year government paper, can be used to estimate the likelihood of recessions in South Africa. The yield spread can produce recession forecasts up to 18 months, although it's best predictive power is seen at two quarters. Results from the standard probit model and the modified pro bit model with a lagged dependent variable are somewhat similar, although the latter model improves forecasts at shorter horizons up to 3 months. Compared with other indicators, real M3 growth is a noisy indicator and does not provide much information about future recessions, whilst movements in the All-Share index can provide information for up to 12 months but does 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 spread performs better at longer horizons. Based on the results from the study, it appears that changes in monetary policy explain the yield spread's predictive power. This is because the yield spread loses its explanatory power when combined with a variable representing the monetary policy stance of the central bank.
- Full Text:
- Date Issued: 2006
The functioning of the interbank market and its significance in the transmission of monetary policy
- Authors: De Angelis, Catherine
- Date: 2013-06-11
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , Money market -- South Africa , Banks and banking -- South Africa , Repurchase agreements -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1075 , http://hdl.handle.net/10962/d1008054 , South African Reserve Bank , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , Money market -- South Africa , Banks and banking -- South Africa , Repurchase agreements -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: Monetary policy in South African is the primary means by which the authorities can influence activity in the overall economy. The South African Reserve Bank accommodates banks through repo transactions for which they charge the repo rate. The most important market in the transmission of the repo rate to the rest of the economy is the interbank market. As such, a detailed discussion of this market is given. In September 200 I the monetary authorities made certain adjustments to the repo system of accommodation, which included changing the repo rate from a floating rate to a fixed rate that would be administratively determined by the MPC. This was done to address certain weaknesses in the floating rate system. This thesis examines and compares the period before and after the adjustments to the repo system, with the aim of determining whether or not the monetary authorities achieved the goals intended from making this change. The repo rate, prime interbank rate, 3-month NCO rate and the prime lending rate are analysed using the Engle-Granger two variable approach and an ECM model to test for causality. It was found that the monetary authorities did not achieve their intended goals as the relationship between the repo rate and the interbank rate was more significant in the first period. Furthermore, the direction of causality the authorities hoped to achieve by implementing the changes were in fact already in place. As such the adjustments to the system changed the transmission mechanism from the one desired by the authorities to one that was not intended. The conclusions reached by this study show that, in terms of the objectives of the monetary authorities, the previous repo system functioned better. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
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- Authors: De Angelis, Catherine
- Date: 2013-06-11
- Subjects: South African Reserve Bank , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , Money market -- South Africa , Banks and banking -- South Africa , Repurchase agreements -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1075 , http://hdl.handle.net/10962/d1008054 , South African Reserve Bank , Monetary policy -- South Africa , Foreign exchange rates -- South Africa , Money market -- South Africa , Banks and banking -- South Africa , Repurchase agreements -- South Africa , South Africa -- Economic policy , South Africa -- Economic conditions
- Description: Monetary policy in South African is the primary means by which the authorities can influence activity in the overall economy. The South African Reserve Bank accommodates banks through repo transactions for which they charge the repo rate. The most important market in the transmission of the repo rate to the rest of the economy is the interbank market. As such, a detailed discussion of this market is given. In September 200 I the monetary authorities made certain adjustments to the repo system of accommodation, which included changing the repo rate from a floating rate to a fixed rate that would be administratively determined by the MPC. This was done to address certain weaknesses in the floating rate system. This thesis examines and compares the period before and after the adjustments to the repo system, with the aim of determining whether or not the monetary authorities achieved the goals intended from making this change. The repo rate, prime interbank rate, 3-month NCO rate and the prime lending rate are analysed using the Engle-Granger two variable approach and an ECM model to test for causality. It was found that the monetary authorities did not achieve their intended goals as the relationship between the repo rate and the interbank rate was more significant in the first period. Furthermore, the direction of causality the authorities hoped to achieve by implementing the changes were in fact already in place. As such the adjustments to the system changed the transmission mechanism from the one desired by the authorities to one that was not intended. The conclusions reached by this study show that, in terms of the objectives of the monetary authorities, the previous repo system functioned better. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
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