The Global Transmission of U.S. Monetary Policy
This paper studies the transmission of US monetary shocks across the globe by employing a high-frequency identification of policy shocks and large VAR techniques, in conjunction with a large macro- financial dataset of global and national indicators covering both advanced and emerging economies. Our identification controls for the information effects of monetary policy and allows […]
Do monetary policy announcements affect foreign exchange returns and volatility? Some evidence from high-frequency intra-day South African data
Our empirical study addresses the question: How does the South African rand respond to scheduled domestic repo rate announcements – surprises and expected changes? Analysis results suggest that monetary policy news is an important determinant of the exchange rate. An unexpected repo rate change, or no change when the market anticipates one, leads to statistically […]
The behaviour of the real effective rate of South Africa: is there a misalignment
The debate about the equilibrium level of the South African rand and the factors driving the currency is ongoing, with a concomitant lack of consensus on the most appropriate level of the exchange rate. The New Growth Path Framework (2011), which provided government’s blueprint for economic growth and job creation, calls for a more competitive […]
The political and economic dynamics of foreign aid: A case study of United States and Chinese aid to Sub-Sahara Africa
The study revisits the issue of the determinants of (development) aid allocation by analyzing the motives of two key traditional and non-traditional foreign aid donors – the United States of America (US) and China, in providing aid to a sample of 31 Sub-Saharan Africa (SSA) countries. The results from the econometric analysis indicate that (i) […]
Comparing Linear and Non-linear Benchmarks of Exchange Rate Forecasting
Throughout the past 3 decades, the random walk model served as exchange rate forecasting benchmark to verify that a model is able to outperform a random process. However, its application as forecasting benchmark is contradictory. Rather than serving as a benchmark that explains exchange rate behaviour, it serves as a benchmark of what we do […]
Volatility Spillovers across South African Asset Classes during Domestic and Foreign Financial Crises
This paper studies domestic volatility transmission in an emerging economy. Daily volatility spillover indices, relating to South African (SA) currencies, bonds and equities, are estimated using variance decompositions from a generalised vector autoregressive (GVAR) model (Pesaran and Shin 1998). The results suggest substantial time-variation in volatility linkages between October 1996 and June 2010. Typically, large […]
Dynamic Returns Linkages and Volatility Transmission between South African and World Major Stock Markets
This paper analyses returns and volatility linkages between the South African (SA) equity market and the world major equity markets using daily data for the period 199-2007. Also analysed is the nature of volatility, the long term trend of volatility and the risk-premium hypothesis. The univariate GARCH and multivariate Vector Autoregressive models are used. Results […]
Testing for Purchasing Power Parity and Uncovered Interest parity in the Presence of Monetary and Exchange Rate Regime Shifts
Occasional Paper 01 Testing for purchasing power parity (PPP) and uncovered interest parity (UIP) has been the focus of many empirically oriented studies. Whilst these simple economic theories of exchange rate and interest rate determination are theoretically attractive, the empirical support for these equilibrium conditions is at best mixed. Many potential reasons have been cited […]
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