E32

Business Fluctuations; Cycles

The welfare cost of macro-prudential policy in a two-country DSGE model

This paper builds a two-country DSGE model with financial frictions and investigates the welfare cost of macro-prudential policy and its impact on financial stability. The two countries in question are the U.S. and South Africa. The results show that macro-prudential policy results in a welfare trade-off between patient and impatient households.

Can bank capital adequacy changes amplify the business cycle in South Africa?

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.

Is There a SADC Business Cycle? Evidence from a Dynamic Factor Model

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.

Credit market heterogeneity, balance sheet (in) dependence, financial shocks

This paper presents a real business cycle model with financial frictions and two credit markets to investigate the qualitative and quantitative relevance of credit market heterogeneity. To address this line of inquiry we contrast the transmission of financial shocks in an economy where loans are the only form of credit to one in which both loans and bonds exist.

Can currency in circulation predict South African economic activity?

The money supply can be broadly defined as consisting of currency and deposits. While currency forms but a small portion of the total money supply, it can be a crucial determinant of spending behaviour and subsequently economic activity. The ability of the money supply to predict an up- or downswing in economic activity, as measured by a positive or negative output gap, is evaluated over a sample period 1980 – 2012. Two models are estimated, one using only the currency component and a second using the total money supply (M3).

Comovement Between Africa and Advanced Economies: 1980-2011

This paper analyses business cycle comovement between African economies and advanced economies. It covers the period 1980 to 2011. The empirical analysis is based on the Dynamic Factor Model applied to annual data for African and G7 countries, covering the period 1980 to 2011. The results indicate that middle-income African countries show consistent business cycle variance shares, both before and after controlling for the influence of the G7.

Macroeconomic Uncertainty in South Africa

This paper develops a new index of economic uncertainty for South Africa for the period 1990-2014 and analyses the macroeconomic impact of changes in this measure. The index is constructed from three sources: (1) Disagreement among professional forecasters about macroeconomic conditions using novel data from a forecasting competition run by a national newspaper, (2) a count of international and local newspaper articles discussing economic uncertainty in South Africa and (3) mentions of uncertainty in the quarterly economic review of the South African Reserve Bank.

Credit spread variability in U.S. business cycles: The Great Moderation versus the Great Recession

This paper establishes the prevailing financial factors that influence credit spread variability, and its impact on the U.S. business cycle over the Great Moderation and Great Recession periods. To do so, we develop a dynamic general equilibrium framework with a central role of financial intermediation and equity assets. Over the Great Moderation and Great Recession periods, we find an important role for bank market power (sticky rate adjustments and loan rate markups) on credit spread variability in the U.S. business cycle.

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