A comparative analysis of the divisia index and the simple sum monetary aggregates for South Africa
- Authors: Moyo, Solomon Simbarashe
- Date: 2009
- Subjects: Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:945 , http://hdl.handle.net/10962/d1002679 , Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Description: The effectiveness of monetary policy in achieving its macroeconomic objectives such as price stability and economic growth depend on the monetary policy tools that are implemented by the Central Bank. Monetary aggregates are one of the tools that have been used as indicators of economic activity and as intermediate targets to achieve these economic objectives. Until recently, monetary aggregates have been questioned and criticised on their usefulness in monetary policy. This has been attributed to the economic, financial and technological developments that have distorted the relationship between monetary aggregates and major macroeconomic variables. This study investigates the relevance of monetary aggregation by comparing the traditional simple sum and Divisia index monetary aggregates which was constructed for the first time for South Africa using the Tornquist-Theil method. The Polynomial Distributed Lag model is employed to compare the performance of these monetary aggregates using their relationship with inflation and manufacturing index. Furthermore, the aggregates are compared in terms of their controllability and information content. Overall, the study found a very strong relationship between inflation and all the monetary aggregates. However, more specifically the results suggested that the Divisia indices are superior to the simple sum in terms of predicting inflation. The evidence further suggests that the Divisia aggregates provide higher information about inflation than the simple sum aggregates. Regarding the controllability of the monetary aggregates, the findings suggest that the monetary authorities can hardly control the monetary aggregates using monetary base. Finally, the relationship between manufacturing index and all the monetary aggregates was very weak.
- Full Text:
- Date Issued: 2009
- Authors: Moyo, Solomon Simbarashe
- Date: 2009
- Subjects: Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:945 , http://hdl.handle.net/10962/d1002679 , Monetary policy -- South Africa , Money supply -- South Africa , Inflation finance -- South Africa , Index numbers (Economics)
- Description: The effectiveness of monetary policy in achieving its macroeconomic objectives such as price stability and economic growth depend on the monetary policy tools that are implemented by the Central Bank. Monetary aggregates are one of the tools that have been used as indicators of economic activity and as intermediate targets to achieve these economic objectives. Until recently, monetary aggregates have been questioned and criticised on their usefulness in monetary policy. This has been attributed to the economic, financial and technological developments that have distorted the relationship between monetary aggregates and major macroeconomic variables. This study investigates the relevance of monetary aggregation by comparing the traditional simple sum and Divisia index monetary aggregates which was constructed for the first time for South Africa using the Tornquist-Theil method. The Polynomial Distributed Lag model is employed to compare the performance of these monetary aggregates using their relationship with inflation and manufacturing index. Furthermore, the aggregates are compared in terms of their controllability and information content. Overall, the study found a very strong relationship between inflation and all the monetary aggregates. However, more specifically the results suggested that the Divisia indices are superior to the simple sum in terms of predicting inflation. The evidence further suggests that the Divisia aggregates provide higher information about inflation than the simple sum aggregates. Regarding the controllability of the monetary aggregates, the findings suggest that the monetary authorities can hardly control the monetary aggregates using monetary base. Finally, the relationship between manufacturing index and all the monetary aggregates was very weak.
- Full Text:
- Date Issued: 2009
The development of the stock market and its effect on economic growth: the case of SADC
- Authors: Elliott, Kevin Andrew
- Date: 2009
- Subjects: Stocks -- Africa, Southern , Stock exchanges -- Africa, Southern , Economic development -- Africa, Southern , Stocks -- Economic aspects -- Africa, Southern
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:967 , http://hdl.handle.net/10962/d1002701 , Stocks -- Africa, Southern , Stock exchanges -- Africa, Southern , Economic development -- Africa, Southern , Stocks -- Economic aspects -- Africa, Southern
- Description: Using a pooled panel data set from nine developing countries within the SADC region from 1992 to 2004, this paper empirically examines; firstly, the relationship between stock market development and long-term economic growth, and secondly, the macroeconomic determinants of stock market development, particularly market capitalisation as a percentage of GDP. The results suggest that there is a strong link between stock market development and economic growth, particularly through the liquidity provided by the market. The evidence obtained lends support to the view that a well-developed and functioning stock market can boost economic growth by enhancing faster capital accumulation and allowing for better resource allocation, particularly in developing countries. In terms of the macroeconomic determinants of stock market development, the results support those of Garcia and Liu (1999), in that we found the indicators of financial intermediary development, the value of shares traded as a percentage of GDP and the macroeconomic instability variable to be important determinants of stock market development.
- Full Text:
- Date Issued: 2009
- Authors: Elliott, Kevin Andrew
- Date: 2009
- Subjects: Stocks -- Africa, Southern , Stock exchanges -- Africa, Southern , Economic development -- Africa, Southern , Stocks -- Economic aspects -- Africa, Southern
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:967 , http://hdl.handle.net/10962/d1002701 , Stocks -- Africa, Southern , Stock exchanges -- Africa, Southern , Economic development -- Africa, Southern , Stocks -- Economic aspects -- Africa, Southern
- Description: Using a pooled panel data set from nine developing countries within the SADC region from 1992 to 2004, this paper empirically examines; firstly, the relationship between stock market development and long-term economic growth, and secondly, the macroeconomic determinants of stock market development, particularly market capitalisation as a percentage of GDP. The results suggest that there is a strong link between stock market development and economic growth, particularly through the liquidity provided by the market. The evidence obtained lends support to the view that a well-developed and functioning stock market can boost economic growth by enhancing faster capital accumulation and allowing for better resource allocation, particularly in developing countries. In terms of the macroeconomic determinants of stock market development, the results support those of Garcia and Liu (1999), in that we found the indicators of financial intermediary development, the value of shares traded as a percentage of GDP and the macroeconomic instability variable to be important determinants of stock market development.
- Full Text:
- Date Issued: 2009
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