Estimating a time-varying financial conditions index for South Africa?

This paper uses 39 monthly time series of the financial market observed from January 2000 to April 2017 to estimate a financial conditions index (FCI) for South Africa. The empirical technique used is a dynamic factor model with time-varying factor loadings proposed by Koop and Korobilis (2014) based on the principal component analysis and the Kalman smoother.

Stock Return Predictability in South Africa: An Alternative Approach

There is considerable debate internationally as to whether share returns are predictable. The limited evidence in South Africa (Gupta and Modise, 2012a, b and 2013) reveals that valuation ratios have no forecasting power but the Treasury bill rate, term spread and money supply have been found to be able to predict share returns at a relatively short horizon. In this study, the consumption aggregate wealth ratio of Lettau and Ludvigson (2001) is applied to South African share returns to assess its forecasting power using in-sample tests over both short and long horizons.

Measuring Core Inflation in South Africa

Measures of core inflation convey critical information about an economy. They have a direct effect on the policy-making process, particularly in inflation-targeting countries, and are utilized in forecasting and modelling exercises. In South a Africa the prices indices on which inflation is based have been subject to important structural breaks following changes to the underlying basket of goods and the methodology for constructing price indices.

Evaluating Non-Linear Approaches in Forecasting Tourist Arrivals

Quantitative methods to forecasting tourist arrivals can be sub-divided into causal methods and non-causal methods. Non-causal time series methods remain popular tourism forecasting tools due to the accuracy of their forecasting ability and general ease of use. Since tourist arrivals exhibit seasonality, SARIMA models are often found to be the most accurate. However, these models assume that the time-series is linear.

A Note on the (continued) Ability of the Yield Curve to Forecast Economic Downturns in South Africa

In 2002/03 the yield spread falsely signalled a downswing that never materialised. This paper provides two reasons for this false signal. Firstly, while the Reserve Bank never actually officially declared the start of a downswing, by other important measures a downswing did actually occur. It is to this slowing in economic activity at that time that the yield curve pointed. Secondly, short-term interest rates in 2003 were higher than they should have been because of a mistake made in measuring consumer price inflation.

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