Stability of the money demand function and monetary inflation in the East African community
- Authors: Nsabimana, Adelit
- Date: 2015
- Subjects: Monetary policy -- Africa, East , Inflation (Finance) -- Africa, East , Equilibrium (Economics)
- Language: English
- Type: Thesis , Doctoral , DCom
- Identifier: http://hdl.handle.net/10948/9163 , vital:26470
- Description: This research attempts to evaluate the stability of money demand functions and estimate monetary inflation models in the East African Community (EAC), using quarterly aggregate data that range from 2000Q1 to 2012Q3. We used Johansen co-integration analysis to estimate and analyse the stability of the M3 money demand model for each country member of the EAC. From this estimation, we derived a country-specific measure of money overhang. We compared its forecasting power of future inflation with that of money stock growth, and money stock available in the economy. Regarding country-specific money demand functions, with the exception of Uganda, we identified a reasonable and stable country-specific M3 money demand model. Also, for predicting future inflation, the estimation results showed that M3 money stock growth is more reliable in Burundi and in Kenya, while M3 money overhang is preferable in Rwanda and M3 money stock in Tanzania. As both country-specific and regional (EAC area) information on monetary quantity growth and its impact on price level is important to know in a monetary union, we considered the EAC area as a single market and attempted to estimate the aggregate (EAC area) demand functions for broad money M2 and M3 using Johansen co-integration analysis. The estimated long-run aggregate money demand models M2 and M3 appeared to be stable over the sample period. However, the aggregate M2 and M3 at the EAC level were proven to be weakly exogenous, which should discard them for consideration at the EAC level as the intermediate targets variables in order to achieve the overall objective of price stability in the EAC region. Instead, short-term interest rate should be given a prominent role in monetary policy framework at the EAC level.
- Full Text:
- Date Issued: 2015
- Authors: Nsabimana, Adelit
- Date: 2015
- Subjects: Monetary policy -- Africa, East , Inflation (Finance) -- Africa, East , Equilibrium (Economics)
- Language: English
- Type: Thesis , Doctoral , DCom
- Identifier: http://hdl.handle.net/10948/9163 , vital:26470
- Description: This research attempts to evaluate the stability of money demand functions and estimate monetary inflation models in the East African Community (EAC), using quarterly aggregate data that range from 2000Q1 to 2012Q3. We used Johansen co-integration analysis to estimate and analyse the stability of the M3 money demand model for each country member of the EAC. From this estimation, we derived a country-specific measure of money overhang. We compared its forecasting power of future inflation with that of money stock growth, and money stock available in the economy. Regarding country-specific money demand functions, with the exception of Uganda, we identified a reasonable and stable country-specific M3 money demand model. Also, for predicting future inflation, the estimation results showed that M3 money stock growth is more reliable in Burundi and in Kenya, while M3 money overhang is preferable in Rwanda and M3 money stock in Tanzania. As both country-specific and regional (EAC area) information on monetary quantity growth and its impact on price level is important to know in a monetary union, we considered the EAC area as a single market and attempted to estimate the aggregate (EAC area) demand functions for broad money M2 and M3 using Johansen co-integration analysis. The estimated long-run aggregate money demand models M2 and M3 appeared to be stable over the sample period. However, the aggregate M2 and M3 at the EAC level were proven to be weakly exogenous, which should discard them for consideration at the EAC level as the intermediate targets variables in order to achieve the overall objective of price stability in the EAC region. Instead, short-term interest rate should be given a prominent role in monetary policy framework at the EAC level.
- Full Text:
- Date Issued: 2015
Financial instability in South Africa : trends and interactions within the financial markets
- Authors: Shikwambana, Jamela
- Date: 2007 , 2013-08-06
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1043 , http://hdl.handle.net/10962/d1005911 , Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Description: This study seeks to investigate the trends and interactions of market volatility as a source of instability in the South African financial markets. Financial instability can be manifested in the form of banking and currency crisis, institutional failures and extreme asset price volatility. This study, however, focuses on a single aspect of financial instability - asset price volatility. Asset price volatility reflects changes in market expectations as investors react to such changes, and thus on its own is not necessarily a source of instability. However, volatility spillovers can propagate volatility shocks across the market, increasing the risk of widespread instability. Using a combination of graphical and trend analysis as well as more formal estimation techniques, the study examined volatility in the stock, money and foreign exchange markets. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, TARCH and EGARCH. An analysis of volatility interactions and the transmission of volatility shocks across the market is crucial to understanding financial instability. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated. This framework allowed us to examine the propagation of shocks across the markets. Volatility in the financial markets was found to be highly persistent and in the case of exchange rates, volatility was also characterised by an increasing trend. Significant linkages between the financial markets were found. The links also extended to the volatility relationship as evidenced by significant volatility spillovers across the markets. While volatility spillovers from the money market were found in the stock market and the foreign exchange market, no volatility spillovers from these markets were found in the money market. Thus the money market was identified as the major source of volatility spillovers and shocks in the financial markets. These results highlighted the role of monetary policy in the financial system, specifically the need to make monetary policy stable and predictable to ensure that interest rate shocks are not an additional source of instability. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
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- Date Issued: 2007
- Authors: Shikwambana, Jamela
- Date: 2007 , 2013-08-06
- Subjects: Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1043 , http://hdl.handle.net/10962/d1005911 , Finance -- South Africa , Financial institutions -- South Africa , Economic stabilization -- South Africa , Stock exchanges -- South Africa , Stocks -- Prices -- South Africa , Interest rates -- South Africa , Equilibrium (Economics)
- Description: This study seeks to investigate the trends and interactions of market volatility as a source of instability in the South African financial markets. Financial instability can be manifested in the form of banking and currency crisis, institutional failures and extreme asset price volatility. This study, however, focuses on a single aspect of financial instability - asset price volatility. Asset price volatility reflects changes in market expectations as investors react to such changes, and thus on its own is not necessarily a source of instability. However, volatility spillovers can propagate volatility shocks across the market, increasing the risk of widespread instability. Using a combination of graphical and trend analysis as well as more formal estimation techniques, the study examined volatility in the stock, money and foreign exchange markets. To obtain estimates of market volatility, the study experimented with various volatility models that include the GARCH, TARCH and EGARCH. An analysis of volatility interactions and the transmission of volatility shocks across the market is crucial to understanding financial instability. To examine volatility interaction and the transmission of volatility shocks, a VAR model was estimated. This framework allowed us to examine the propagation of shocks across the markets. Volatility in the financial markets was found to be highly persistent and in the case of exchange rates, volatility was also characterised by an increasing trend. Significant linkages between the financial markets were found. The links also extended to the volatility relationship as evidenced by significant volatility spillovers across the markets. While volatility spillovers from the money market were found in the stock market and the foreign exchange market, no volatility spillovers from these markets were found in the money market. Thus the money market was identified as the major source of volatility spillovers and shocks in the financial markets. These results highlighted the role of monetary policy in the financial system, specifically the need to make monetary policy stable and predictable to ensure that interest rate shocks are not an additional source of instability. , KMBT_363 , Adobe Acrobat 9.54 Paper Capture Plug-in
- Full Text:
- Date Issued: 2007
The Entrepreneur as a disequilibrating factor in economic process
- Authors: Ncwadi, Mcebisi Ronney
- Subjects: Entrepreneurship , Equilibrium (Economics) , f-sa
- Language: English
- Type: text , Lectures
- Identifier: http://hdl.handle.net/10948/55844 , vital:54275
- Description: The evidence of entrepreneurship's significant contribution to economic growth and development, challenges the dominance of general equilibrium theory in microeconomics. The assumptions of the neoclassical economic model which underlies general equilibrium theory has long time been criticised; yet its consideration in policy formulation has not been dismissed despite the fact that general equilibrium theory does not incorporate entrepreneurship. The assumptions embedded in neoclassical economic theory exclude entrepreneurship as an economic variable. However, as microeconomic research finds more and more evidence confirming the importance of new business formation and growth, general equilibrium theory remains incapable of adapting to this reality. To this end general equilibrium theory produces policy prescriptions which favour mainly large, established firms over new, small firms. It is therefore no wonder that a large number of small businesses in South Africa are failing. This lecture presents the theory of the firm and also defines an entrepreneur within the context of the theory of the firm. In doing so, this lecture exposes the shortcomings of the general equilibrium theory which is used to explain entrepreneurship. Based on Schumpeter’s description of an entrepreneur, namely, a Disequilibrating factor of economic processes; this lecture demonstrates how entrepreneurship should be understood and developed within a broader scope of microeconomics discourse.
- Full Text:
- Authors: Ncwadi, Mcebisi Ronney
- Subjects: Entrepreneurship , Equilibrium (Economics) , f-sa
- Language: English
- Type: text , Lectures
- Identifier: http://hdl.handle.net/10948/55844 , vital:54275
- Description: The evidence of entrepreneurship's significant contribution to economic growth and development, challenges the dominance of general equilibrium theory in microeconomics. The assumptions of the neoclassical economic model which underlies general equilibrium theory has long time been criticised; yet its consideration in policy formulation has not been dismissed despite the fact that general equilibrium theory does not incorporate entrepreneurship. The assumptions embedded in neoclassical economic theory exclude entrepreneurship as an economic variable. However, as microeconomic research finds more and more evidence confirming the importance of new business formation and growth, general equilibrium theory remains incapable of adapting to this reality. To this end general equilibrium theory produces policy prescriptions which favour mainly large, established firms over new, small firms. It is therefore no wonder that a large number of small businesses in South Africa are failing. This lecture presents the theory of the firm and also defines an entrepreneur within the context of the theory of the firm. In doing so, this lecture exposes the shortcomings of the general equilibrium theory which is used to explain entrepreneurship. Based on Schumpeter’s description of an entrepreneur, namely, a Disequilibrating factor of economic processes; this lecture demonstrates how entrepreneurship should be understood and developed within a broader scope of microeconomics discourse.
- Full Text:
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