The South African economy and internationally fuelled business cycles: an econometric analysis
- Authors: Conradie, Tiaan
- Date: 2015
- Subjects: Business cycles -- Econometric models , Econometrics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/4354 , vital:20588
- Description: The objective of this study is to understand the dynamics of international monetary policy and the relationship that exists between larger more developed economies and smaller less developed economies within a policy context. The 2008 financial crisis has caused intense revival of Austrian economics due to the monetary nature of the recession caused as a subsequent effect of the stock/housing market collapse that occurred in 2007. One factor of the 2008 financial crisis that created intense concern was the extent to which the slowdown in economic activity was able to be transmitted across international borders. The South African economy was not isolated from the financial crisis by any means and experienced a significant slowdown in economic growth. By making use of data collected from the Federal Reserve Bank of St. Louis and the appropriate econometric techniques, a model is developed to study the dynamics between United States monetary policy and the South African economy. The Austrian School provides a sound theoretical framework that allows for the specification of testable propositions to verify the validity of an “Austrian” internationally transmitted business cycle. Using United States money supply, South African private consumption, South African gross fixed capital formation and the South African current account, a vector autoregressive model is specified to analyse the dynamics behind the United States and South African economy. The results of the empirical test all confirm the theoretical prescriptions developed in the literature review that monetary growth in the United States raise consumption, investment and improve the current account balance in the South African economy. This is a novel result for this study as it confirms that a large central economy has the ability to trigger economic expansions in a peripheral economy. This study further points out the inefficiencies associated with Keynesian style policy making and propagates for a movement towards a more prudent Austrian approach. Keynesian policy making through demand oriented policies have historically been more concerned with “curing” economic instability rather than preventing it. In light of this, the need for economic reform specifically within the manner in which monetary policy is conducted is evident. Aggressive monetary policy in the wake of economic slowdown is no longer effective at creating a sustainable and stable economic environment. A movement away from the monopolization of money and central economic decision making is necessary if the global economy wishes to reach economic permanence.
- Full Text:
- Date Issued: 2015
- Authors: Conradie, Tiaan
- Date: 2015
- Subjects: Business cycles -- Econometric models , Econometrics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/4354 , vital:20588
- Description: The objective of this study is to understand the dynamics of international monetary policy and the relationship that exists between larger more developed economies and smaller less developed economies within a policy context. The 2008 financial crisis has caused intense revival of Austrian economics due to the monetary nature of the recession caused as a subsequent effect of the stock/housing market collapse that occurred in 2007. One factor of the 2008 financial crisis that created intense concern was the extent to which the slowdown in economic activity was able to be transmitted across international borders. The South African economy was not isolated from the financial crisis by any means and experienced a significant slowdown in economic growth. By making use of data collected from the Federal Reserve Bank of St. Louis and the appropriate econometric techniques, a model is developed to study the dynamics between United States monetary policy and the South African economy. The Austrian School provides a sound theoretical framework that allows for the specification of testable propositions to verify the validity of an “Austrian” internationally transmitted business cycle. Using United States money supply, South African private consumption, South African gross fixed capital formation and the South African current account, a vector autoregressive model is specified to analyse the dynamics behind the United States and South African economy. The results of the empirical test all confirm the theoretical prescriptions developed in the literature review that monetary growth in the United States raise consumption, investment and improve the current account balance in the South African economy. This is a novel result for this study as it confirms that a large central economy has the ability to trigger economic expansions in a peripheral economy. This study further points out the inefficiencies associated with Keynesian style policy making and propagates for a movement towards a more prudent Austrian approach. Keynesian policy making through demand oriented policies have historically been more concerned with “curing” economic instability rather than preventing it. In light of this, the need for economic reform specifically within the manner in which monetary policy is conducted is evident. Aggressive monetary policy in the wake of economic slowdown is no longer effective at creating a sustainable and stable economic environment. A movement away from the monopolization of money and central economic decision making is necessary if the global economy wishes to reach economic permanence.
- Full Text:
- Date Issued: 2015
Good's casualty for time series: a regime-switching framework
- Authors: Mlambo, Farai Fredric
- Date: 2014
- Subjects: Time-series analysis , Econometrics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/6018 , vital:21025
- Description: Causal analysis is a significant role-playing field in the applied sciences such as statistics, econometrics, and technometrics. Particularly, probability-raising models have warranted significant research interest. Most of the discussions in this area are philosophical in nature. Contemporarily, the econometric causality theory, developed by C.J.W. Granger, is popular in practical, time series causal applications. While this type of causality technique has many strong features, it has serious limitations. The processes studied, in particular, should be stationary and causal relationships are restricted to be linear. However, we cannot classify regime-switching processes as linear and stationary. I.J. Good proposed a probabilistic, event-type explication of causality that circumvents some of the limitations of Granger’s methodology. This work uses the probability raising causality ideology, as postulated by Good, to propose some causal analysis methodology applicable in a stochastic, non-stationary domain. There is a proposal made for a Good’s causality test, by transforming the originally specified probabilistic causality theory from random events to a stochastic, regime-switching framework. The researcher performed methodological validation via causality simulations for a Markov, regime-switching model. The proposed test can be used to detect whether none stochastic process is causal to the observed behaviour of another, probabilistically. In particular, the regime-switch causality explication proposed herein is pivotal to the results articulated. This research also examines the power of the proposed test by using simulations, and outlines some steps that one may take in using the test in a practical setting.
- Full Text:
- Date Issued: 2014
- Authors: Mlambo, Farai Fredric
- Date: 2014
- Subjects: Time-series analysis , Econometrics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/6018 , vital:21025
- Description: Causal analysis is a significant role-playing field in the applied sciences such as statistics, econometrics, and technometrics. Particularly, probability-raising models have warranted significant research interest. Most of the discussions in this area are philosophical in nature. Contemporarily, the econometric causality theory, developed by C.J.W. Granger, is popular in practical, time series causal applications. While this type of causality technique has many strong features, it has serious limitations. The processes studied, in particular, should be stationary and causal relationships are restricted to be linear. However, we cannot classify regime-switching processes as linear and stationary. I.J. Good proposed a probabilistic, event-type explication of causality that circumvents some of the limitations of Granger’s methodology. This work uses the probability raising causality ideology, as postulated by Good, to propose some causal analysis methodology applicable in a stochastic, non-stationary domain. There is a proposal made for a Good’s causality test, by transforming the originally specified probabilistic causality theory from random events to a stochastic, regime-switching framework. The researcher performed methodological validation via causality simulations for a Markov, regime-switching model. The proposed test can be used to detect whether none stochastic process is causal to the observed behaviour of another, probabilistically. In particular, the regime-switch causality explication proposed herein is pivotal to the results articulated. This research also examines the power of the proposed test by using simulations, and outlines some steps that one may take in using the test in a practical setting.
- Full Text:
- Date Issued: 2014
Econometric Techniques: ECO 513
- Authors: Zeketha, T Z , Nel, H
- Date: 2012-02
- Subjects: Econometrics
- Language: English
- Type: Examination paper
- Identifier: vital:18082 , http://hdl.handle.net/10353/d1010757
- Description: Econometric Techniques: ECO 513, special examination February 2012.
- Full Text: false
- Date Issued: 2012-02
- Authors: Zeketha, T Z , Nel, H
- Date: 2012-02
- Subjects: Econometrics
- Language: English
- Type: Examination paper
- Identifier: vital:18082 , http://hdl.handle.net/10353/d1010757
- Description: Econometric Techniques: ECO 513, special examination February 2012.
- Full Text: false
- Date Issued: 2012-02
Cointegration, causality and international portfolio diversification : investigating potential benefits to a South African investor
- Authors: Msimanga, Nkululeko Lwazi
- Date: 2011
- Subjects: Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:962 , http://hdl.handle.net/10962/d1002696 , Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Description: Research studies on portfolio diversification have tended to focus on developed markets and paid less attention to emerging markets. Traditionally, correlation analysis has been used to determine potential benefits from diversification but current studies have shifted focus from correlation analysis to exploring cointegration analysis and other forms of tests such as the Vector Error Correction Methodology. The research seeks to find if it is beneficial for a South African investor to diversify their portfolio of emerging market equities over a long-term period. Daily weighted share indices for the period of January 1996 to November 2008 were collected and analysed through the application of the Johansen cointegration technique and Vector Error Correction Methodology. Granger Causality tests were also performed to established whether one variable can be useful in forecasting another variable. The study found that there was at least one statistically significant long-run relationship between the emerging markets. After testing for unit roots for all the share indices and their first difference using the Augmented Dickey-Fuller test (ADF), Philips-Perron and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests, similar conclusions were m~de. All the unit root tests and their levels could not be rejected for all the series. However, unit root tests on the first differences were rejected, meaning that all series are of order 1(1) - evidence of cointegration. Simply put, emerging markets tend not to drift apart over time. This suggests that emerging markets offer limited benefits to investors who are looking to add some risk to their portfolios. In addition, the study also found evidence of both unidirectional and bidirectional causality (Granger-Cause tests) between markets. This implies that the conditions for a particular market are exogenous of the other market. The study concludes that emerging markets are gradually adopting the same profile as developed markets.
- Full Text:
- Date Issued: 2011
- Authors: Msimanga, Nkululeko Lwazi
- Date: 2011
- Subjects: Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:962 , http://hdl.handle.net/10962/d1002696 , Cointegration , Econometrics , International finance , Stock exchanges -- South Africa , Stock exchanges -- Developing countries , Stock exchanges -- Developed countries , Investments -- South Africa , Portfolio management -- South Africa , Investment analysis , Autoregression (Statistics)
- Description: Research studies on portfolio diversification have tended to focus on developed markets and paid less attention to emerging markets. Traditionally, correlation analysis has been used to determine potential benefits from diversification but current studies have shifted focus from correlation analysis to exploring cointegration analysis and other forms of tests such as the Vector Error Correction Methodology. The research seeks to find if it is beneficial for a South African investor to diversify their portfolio of emerging market equities over a long-term period. Daily weighted share indices for the period of January 1996 to November 2008 were collected and analysed through the application of the Johansen cointegration technique and Vector Error Correction Methodology. Granger Causality tests were also performed to established whether one variable can be useful in forecasting another variable. The study found that there was at least one statistically significant long-run relationship between the emerging markets. After testing for unit roots for all the share indices and their first difference using the Augmented Dickey-Fuller test (ADF), Philips-Perron and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests, similar conclusions were m~de. All the unit root tests and their levels could not be rejected for all the series. However, unit root tests on the first differences were rejected, meaning that all series are of order 1(1) - evidence of cointegration. Simply put, emerging markets tend not to drift apart over time. This suggests that emerging markets offer limited benefits to investors who are looking to add some risk to their portfolios. In addition, the study also found evidence of both unidirectional and bidirectional causality (Granger-Cause tests) between markets. This implies that the conditions for a particular market are exogenous of the other market. The study concludes that emerging markets are gradually adopting the same profile as developed markets.
- Full Text:
- Date Issued: 2011
Exchange rate pass-through to domestic prices in Kenya
- Authors: Mnjama, Gladys Susan
- Date: 2011
- Subjects: Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:975 , http://hdl.handle.net/10962/d1002709 , Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Description: In 1993, Kenya liberalised its trade policy and allowed the Kenyan Shillings to freely float. This openness has left Kenya's domestic prices vulnerable to the effects of exchange rate fluctuations. One of the objectives of the Central Bank of Kenya is to maintain inflation levels at sustainable levels. Thus it has become necessary to determine the influence that exchange rate changes have on domestic prices given that one of the major determinants of inflation is exchange rate movements. For this reason, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to domestic prices in Kenya. In addition, it takes into account the direction and size of changes in the exchange rates to determine whether the exchange rate fluctuations are symmetric or asymmetric. The thesis uses quarterly data ranging from 1993:Ql - 2008:Q4 as it takes into account the period when the process of liberalization occurred. The empirical estimation was done in two stages. The first stage was estimated using the Johansen (1991) and (1995) co integration techniques and a vector error correction model (VECM). The second stage entailed estimating the impulse response and variance decomposition functions as well as conducting block exogeneity Wald tests. In determining the asymmetric aspect of the analysis, the study followed Pollard and Coughlin (2004) and Webber (2000) frameworks in analysing asymmetry with respect to appreciation and depreciation and large and small changes in the exchange rate to import prices. The results obtained showed that ERPT to Kenya is incomplete but relatively low at about 36 percent in the long run. In terms of asymmetry, the results showed that ERPT is found to be higher in periods of appreciation than depreciation. This is in support of market share and binding quantity constraints theory. In relation to size changes, the results show that size changes have no significant impact on ERPT in Kenya.
- Full Text:
- Date Issued: 2011
- Authors: Mnjama, Gladys Susan
- Date: 2011
- Subjects: Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:975 , http://hdl.handle.net/10962/d1002709 , Kenya -- Economic conditions , Kenya -- Economic conditions -- Econometric models , Foreign exchange rates -- Kenya , Stocks -- Prices -- Kenya , Banks and banking -- Kenya , Cointegration , Econometrics , Inflation (Finance) -- Kenya
- Description: In 1993, Kenya liberalised its trade policy and allowed the Kenyan Shillings to freely float. This openness has left Kenya's domestic prices vulnerable to the effects of exchange rate fluctuations. One of the objectives of the Central Bank of Kenya is to maintain inflation levels at sustainable levels. Thus it has become necessary to determine the influence that exchange rate changes have on domestic prices given that one of the major determinants of inflation is exchange rate movements. For this reason, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to domestic prices in Kenya. In addition, it takes into account the direction and size of changes in the exchange rates to determine whether the exchange rate fluctuations are symmetric or asymmetric. The thesis uses quarterly data ranging from 1993:Ql - 2008:Q4 as it takes into account the period when the process of liberalization occurred. The empirical estimation was done in two stages. The first stage was estimated using the Johansen (1991) and (1995) co integration techniques and a vector error correction model (VECM). The second stage entailed estimating the impulse response and variance decomposition functions as well as conducting block exogeneity Wald tests. In determining the asymmetric aspect of the analysis, the study followed Pollard and Coughlin (2004) and Webber (2000) frameworks in analysing asymmetry with respect to appreciation and depreciation and large and small changes in the exchange rate to import prices. The results obtained showed that ERPT to Kenya is incomplete but relatively low at about 36 percent in the long run. In terms of asymmetry, the results showed that ERPT is found to be higher in periods of appreciation than depreciation. This is in support of market share and binding quantity constraints theory. In relation to size changes, the results show that size changes have no significant impact on ERPT in Kenya.
- Full Text:
- Date Issued: 2011
Model selection for cointegrated relationships in small samples
- He, Wei
- Authors: He, Wei
- Date: 2008
- Subjects: Economics -- Statistical methods , Cointegration -- South Africa , Econometrics
- Language: English
- Type: Thesis , Masters , MSc
- Identifier: vital:10570 , http://hdl.handle.net/10948/971 , Economics -- Statistical methods , Cointegration -- South Africa , Econometrics
- Description: Vector autoregression models have become widely used research tools in the analysis of macroeconomic time series. Cointegrated techniques are an essential part of empirical macroeconomic research. They infer causal long-run relationships between nonstationary variables. In this study, six information criteria were reviewed and compared. The methods focused on determining the optimum information criteria for detecting the correct lag structure of a two-variable cointegrated process.
- Full Text:
- Date Issued: 2008
- Authors: He, Wei
- Date: 2008
- Subjects: Economics -- Statistical methods , Cointegration -- South Africa , Econometrics
- Language: English
- Type: Thesis , Masters , MSc
- Identifier: vital:10570 , http://hdl.handle.net/10948/971 , Economics -- Statistical methods , Cointegration -- South Africa , Econometrics
- Description: Vector autoregression models have become widely used research tools in the analysis of macroeconomic time series. Cointegrated techniques are an essential part of empirical macroeconomic research. They infer causal long-run relationships between nonstationary variables. In this study, six information criteria were reviewed and compared. The methods focused on determining the optimum information criteria for detecting the correct lag structure of a two-variable cointegrated process.
- Full Text:
- Date Issued: 2008
Consistent testing for lag length in cointegrated relationships
- Authors: Liu, Limin
- Date: 2007
- Subjects: Cointegration -- South Africa , Econometrics
- Language: English
- Type: Thesis , Masters , MSc
- Identifier: vital:10575 , http://hdl.handle.net/10948/547 , http://hdl.handle.net/10948/d1011715 , Cointegration -- South Africa , Econometrics
- Description: In the past few decades the theory of cointegration has been widely used in the empirical analysis of economic data. The reason is that, it captures the economic notion of a long-run economic relation. One of the problems experienced when applying cointegrated techniques to econometric modelling is the determination of lag lengths for the modelled variables. Applied studies have resulted in contradictory choices for lag length selection. This study reviews and compares some of the well-known information criteria using simulation techniques for bivariate models.
- Full Text:
- Date Issued: 2007
- Authors: Liu, Limin
- Date: 2007
- Subjects: Cointegration -- South Africa , Econometrics
- Language: English
- Type: Thesis , Masters , MSc
- Identifier: vital:10575 , http://hdl.handle.net/10948/547 , http://hdl.handle.net/10948/d1011715 , Cointegration -- South Africa , Econometrics
- Description: In the past few decades the theory of cointegration has been widely used in the empirical analysis of economic data. The reason is that, it captures the economic notion of a long-run economic relation. One of the problems experienced when applying cointegrated techniques to econometric modelling is the determination of lag lengths for the modelled variables. Applied studies have resulted in contradictory choices for lag length selection. This study reviews and compares some of the well-known information criteria using simulation techniques for bivariate models.
- Full Text:
- Date Issued: 2007
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