F41

Open Economy Macroeconomics

Monetary policy in a model with commodity and financial market

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.

Credit frictions and co-movement of durable and non-durable goods in a small open economy

In this paper I investigate, numerically, the co-movement puzzle by testing the ability of borrowing and lending constraints to counter the opposite movement of durable and non-durable goods in response to foreign monetary policy and international bond shocks. I do this by simulating a small open economy sticky price model calibrated to the South African economy over the period 1990Q012014Q04.

Macroprudential policy and foreign interest rate shocks: A comparison of different instruments and regulatory regimes

This paper presents a generic small open economy real business cycle model with banking and foreign borrowing. We incorporate capital requirements, reserve requirements, and loan-to-value (LTV) regulation into this framework, and subject the model to a positive foreign interest rate shock that raises the country risk premium and reduces the supply of foreign funds. The results show that these macroprudential instruments can attenuate the impact of such a shock, and that this attenuation property increases with the strictness of the regulatory regime.

Do monetary policy announcements affect foreign exchange returns and volatility? Some evidence from high-frequency intra-day South African data.

This paper examines the temporal effect of domestic monetary policy surprises on both the levels and volatility of the South African rand/United States dollar exchange rate. The analysis in this ‘event study’ proceeds using intra-day minute-by-minute exchange rate data, repo rate data from the South African Reserve Bank’s scheduled monetary policy announcements, and Bloomberg market consensus repo rate forecasts.

The behaviour of the real effective exchange rate of South Africa: is there a misalignment?

The paper uses Behavioural Equilibrium Exchange Rate methodology to estimate the equilibrium real effective exchange rate of the rand and to establish whether the observed exchange rate is misaligned with this level. The exchange rate’s misalignment behaviour is further explored using a regime switching method. Results endorse the existence of a co-integrating relationship between the exchange rate and terms of trade, external openness, capital flows and government expenditure.

Assessment of Monetary Union in SADC: Evidence from Cointegration and Panel Unit Root Tests

In this paper we investigate the likelihood of a proposed monetary union in the Southern African Development Community (SADC) being successful from the viewpoint of the Generalised Purchasing Power Parity (GPPP) hypothesis and optimum currency area (OCA) theory. We apply Johansen’s multivariate co-integration technique, panel unit root tests, Pedroni’s residual cointegration test and error correction based panel co-integration tests.

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