This paper builds a small open economy model for a net commodity exporter to consider financial frictions and monetary policies in order to investigate the main determinants of business cycles. Since we make a distinction to the access of financial markets between the commodity and non-commodity sectors, we notice that as usual, a commodity price shock benefits the competitiveness of the economy and its borrowing terms.
Business Fluctuations; Cycles
Most of the recent literature analysing the adjustments of macroeconomic variables to fiscal policy shocks rely on the inclusion of non-Ricardian households to generate a positive response of consumption to an increase in government spending. This paper examines the dynamic effects of government financing behaviour in a foreign exchange constrained low income economy on key macroeconomic aggregates such as output, consumption, wages and labour supply.
Financial globalisation and financial innovation have increased most banks’ appetite for risk and therefore engendered financial fragility in the financial system. This paper examines the relationship between regulatory bank capital adequacy and the business cycle in South Africa using Vector error correction model (VECM). This paper employed quarterly data from South Africa Reserve Bank (SARB) for the period 1990 to 2013.
Countries that adopt a common currency automatically relinquish their monetary policy autonomy. Hence, it is imperative for countries wanting to join a currency union to ensure that their business cycles are synchronized in order to ensure symmetric propagation of the effect of monetary policy. Put differently, countries with asynchronous business cycles require country-specific policies to stabilize their economies. Thus, in this study we assess the readiness of the SADC region to adopt a single currency in 2018 as proposed.