The impact of market volatility on economic performance
- Authors: Geldenhuys, Ilse.
- Date: 2012-08-17
- Subjects: Economic indicators. , Foreign exchange rates. , Inflation (Finance) , Economic forecasting. , Regression analysis. , Time-series analysis.
- Type: Thesis
- Identifier: uj:2603 , http://hdl.handle.net/10210/6051
- Description: M.Comm. , The aim of this study is to discuss, analyse and forecast market volatility. Financial liberalisation and technological innovation have taken place during the past twenty-five years, producing a highly integrated and competitive world financial system in which trillions of dollars are traded every day (Murray, van Norden & Vigfusson, 1996:1). These developments have been positive, but there are concerns about the problems that such unregulated capital flows might pose for the efficient pricing of financial assets and the stability of domestic and international financial markets. Speculation has increased and greater competition, information technology and new securities lead to excessive price volatility. Stocks, bonds and foreign exchange are more sensitive to sudden shocks and trade at prices that appear inconsistent with market fundamentals. It is important to point out the causes of market volatility in order to determine if any precautions can be taken to prevent the enormous impact of market volatility on economic performance. The study could be useful for investors and dealers. It might enable them to forecast volatility and use it as a risk management instrument.
- Full Text:
- Authors: Geldenhuys, Ilse.
- Date: 2012-08-17
- Subjects: Economic indicators. , Foreign exchange rates. , Inflation (Finance) , Economic forecasting. , Regression analysis. , Time-series analysis.
- Type: Thesis
- Identifier: uj:2603 , http://hdl.handle.net/10210/6051
- Description: M.Comm. , The aim of this study is to discuss, analyse and forecast market volatility. Financial liberalisation and technological innovation have taken place during the past twenty-five years, producing a highly integrated and competitive world financial system in which trillions of dollars are traded every day (Murray, van Norden & Vigfusson, 1996:1). These developments have been positive, but there are concerns about the problems that such unregulated capital flows might pose for the efficient pricing of financial assets and the stability of domestic and international financial markets. Speculation has increased and greater competition, information technology and new securities lead to excessive price volatility. Stocks, bonds and foreign exchange are more sensitive to sudden shocks and trade at prices that appear inconsistent with market fundamentals. It is important to point out the causes of market volatility in order to determine if any precautions can be taken to prevent the enormous impact of market volatility on economic performance. The study could be useful for investors and dealers. It might enable them to forecast volatility and use it as a risk management instrument.
- Full Text:
Inflation targeting : theory, evidence and the case of South African monetary policy
- Authors: Dos Santos, Tanya
- Date: 2012-08-20
- Subjects: Inflation (Finance) , Inflation (Finance) -- South Africa , Monetary policy -- South Africa
- Type: Thesis
- Identifier: uj:2794 , http://hdl.handle.net/10210/6232
- Description: M.Comm. , The aim of this study is to examine the appropriateness of inflation targeting as the future monetary policy strategy of South Africa. In keeping with international trends, South Africa needs to recognise the changing financial environment in which the Reserve Bank must now operate. The purpose of this study is to show whether South Africa's economic environment and the SARB as the monetary authorities, are indeed ready for implementing inflation targeting in South Africa. Given the limited experience with inflation targeting, the theoretical analysis has formed the foundation that has shaped and influenced the thinking on this strategy monetary policy. The rationale for price stability as the long-term goal of monetary policy is pivotal to all the strategies for controlling inflation: exchange rate pegging; monetary targeting; nominal GDP targeting; the "Just Do It" policy; and lastly, inflation targeting. This study examines the key features and concepts of inflation targeting in order to determine their relevance in a framework for South Africa. Transparency and accountability are central to the inflation-targeting regime and depend largely on the independence of the central bank. It is important to establish the credibility and flexibility of the inflation-targeting framework through frequent communication and by ensuring the accountability of the central bank to the government and the public. Policymakers are faced with many issues and choices when designing the inflation targeting strategy and the potential benefits of the framework will depend on how effectively the strategy is formulated and implemented. It is vital that the design of the strategy attempt to effectively balance both the transparency and the flexibility of the framework. Once we have the theoretical basis we do a detailed analysis of the international experience with inflation targeting. The 1990's saw a number of countries adopting explicit inflation targets as the goal of monetary policy: New Zealand, Canada, the United Kingdom, Sweden, Australia, Finland, Israel, Spain and the Czech Republic. Each country had its own challenges and issues with designing the inflation-targeting framework. We draw on the lessons from the international experience to assess the applicability of inflation targeting for South Africa. After looking at a brief history of South African monetary policy we consider whether the institutional framework in South Africa is appropriate for effectively implementing inflation targeting. We also take a look at the issues of design and implementation that are relevant to the South African situation while considering the central question of whether South Africa is indeed ready for inflation targeting. Finally, we show that the success of an inflation-targeting framework in South Africa will depend on the ability of the Reserve Bank to ensure the transparency of monetary policy and the reliability of the inflation forecasts. At the same time, the credibility of the inflation-targeting regime will depend, not only on a political commitment by the government, but also on the unfailing support of the labour market and the general public. Thus, the biggest challenge facing the Reserve Bank is to prepare itself and the South African market for the new age of direct inflation targeting as an anchor for monetary policy.
- Full Text:
- Authors: Dos Santos, Tanya
- Date: 2012-08-20
- Subjects: Inflation (Finance) , Inflation (Finance) -- South Africa , Monetary policy -- South Africa
- Type: Thesis
- Identifier: uj:2794 , http://hdl.handle.net/10210/6232
- Description: M.Comm. , The aim of this study is to examine the appropriateness of inflation targeting as the future monetary policy strategy of South Africa. In keeping with international trends, South Africa needs to recognise the changing financial environment in which the Reserve Bank must now operate. The purpose of this study is to show whether South Africa's economic environment and the SARB as the monetary authorities, are indeed ready for implementing inflation targeting in South Africa. Given the limited experience with inflation targeting, the theoretical analysis has formed the foundation that has shaped and influenced the thinking on this strategy monetary policy. The rationale for price stability as the long-term goal of monetary policy is pivotal to all the strategies for controlling inflation: exchange rate pegging; monetary targeting; nominal GDP targeting; the "Just Do It" policy; and lastly, inflation targeting. This study examines the key features and concepts of inflation targeting in order to determine their relevance in a framework for South Africa. Transparency and accountability are central to the inflation-targeting regime and depend largely on the independence of the central bank. It is important to establish the credibility and flexibility of the inflation-targeting framework through frequent communication and by ensuring the accountability of the central bank to the government and the public. Policymakers are faced with many issues and choices when designing the inflation targeting strategy and the potential benefits of the framework will depend on how effectively the strategy is formulated and implemented. It is vital that the design of the strategy attempt to effectively balance both the transparency and the flexibility of the framework. Once we have the theoretical basis we do a detailed analysis of the international experience with inflation targeting. The 1990's saw a number of countries adopting explicit inflation targets as the goal of monetary policy: New Zealand, Canada, the United Kingdom, Sweden, Australia, Finland, Israel, Spain and the Czech Republic. Each country had its own challenges and issues with designing the inflation-targeting framework. We draw on the lessons from the international experience to assess the applicability of inflation targeting for South Africa. After looking at a brief history of South African monetary policy we consider whether the institutional framework in South Africa is appropriate for effectively implementing inflation targeting. We also take a look at the issues of design and implementation that are relevant to the South African situation while considering the central question of whether South Africa is indeed ready for inflation targeting. Finally, we show that the success of an inflation-targeting framework in South Africa will depend on the ability of the Reserve Bank to ensure the transparency of monetary policy and the reliability of the inflation forecasts. At the same time, the credibility of the inflation-targeting regime will depend, not only on a political commitment by the government, but also on the unfailing support of the labour market and the general public. Thus, the biggest challenge facing the Reserve Bank is to prepare itself and the South African market for the new age of direct inflation targeting as an anchor for monetary policy.
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Drivers of wage demands in a low-inflation and recessionary environment
- Authors: Mmolaeng, Makgotla
- Date: 2012-10-25
- Subjects: Recessions , Inflation (Finance) , Wage payment systems , Pay equity , Labor unions
- Type: Mini-Dissertation
- Identifier: uj:10437 , http://hdl.handle.net/10210/7903
- Description: M.Comm. , According to Seboni (2007), narrowing the wage gap is a key concern for the trade unions and the linch pin on which many of the current negotiations have been based. Attempts to find a negotiated settlement to the wage dispute between the employer organisations and trade unions in various sectors are more often than not protracted leading to threat and ultimately strike actions by unions and their members. On the other hand Statistics South Africa (StatisticsSA) (2010) has indicated that inflation is down, spending is down, and economic confidence is at its lowest ebb for years. As businesses face up to their most challenging conditions for some time, the pressure on Human Resource (HR)to act is immense because jobs must be cut, wages frozen and recruitment stopped(Charman, 2008). This would not augur well with the unions within the South African environment where there are continuous endeavours to protect jobs, increase wages and a quest to get more unemployed into the job market.The current global economic meltdown requires of all role players to act cautiously in order for organisations to stay competitive whilst at the same time riding the storm. For the purposes of this study, remuneration includes components such as base pay, fringe benefits and perks, short and medium term incentives as well as long term incentives.
- Full Text:
- Authors: Mmolaeng, Makgotla
- Date: 2012-10-25
- Subjects: Recessions , Inflation (Finance) , Wage payment systems , Pay equity , Labor unions
- Type: Mini-Dissertation
- Identifier: uj:10437 , http://hdl.handle.net/10210/7903
- Description: M.Comm. , According to Seboni (2007), narrowing the wage gap is a key concern for the trade unions and the linch pin on which many of the current negotiations have been based. Attempts to find a negotiated settlement to the wage dispute between the employer organisations and trade unions in various sectors are more often than not protracted leading to threat and ultimately strike actions by unions and their members. On the other hand Statistics South Africa (StatisticsSA) (2010) has indicated that inflation is down, spending is down, and economic confidence is at its lowest ebb for years. As businesses face up to their most challenging conditions for some time, the pressure on Human Resource (HR)to act is immense because jobs must be cut, wages frozen and recruitment stopped(Charman, 2008). This would not augur well with the unions within the South African environment where there are continuous endeavours to protect jobs, increase wages and a quest to get more unemployed into the job market.The current global economic meltdown requires of all role players to act cautiously in order for organisations to stay competitive whilst at the same time riding the storm. For the purposes of this study, remuneration includes components such as base pay, fringe benefits and perks, short and medium term incentives as well as long term incentives.
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The relationship between inflation, inflation uncertainty, and economic growth in South Africa
- Authors: Pretorius, Krüger
- Date: 2014-01-14
- Subjects: Inflation (Finance) , Economic development - South Africa , Monetary policy - South Africa
- Type: Thesis
- Identifier: uj:7880 , http://hdl.handle.net/10210/8771
- Description: M.Comm. (Financial Economics) , This dissertation examines the relationship between inflation, inflation uncertainty, and economic growth using quarterly data for South Africa covering the period 1960-2012. Inflation uncertainty is estimated using the Generalized Autoregressive Conditional Heteroscedasticity modelling framework. Granger methods are employed in order to investigate the interaction between inflation, inflation uncertainty, and economic growth. The presence of structural change is investigated through dummy variables representing changes in monetary policy regime. No evidence is found of any significant structural change in either inflation or inflation uncertainty. Granger results indicate that inflation uncertainty has a negative impact on inflation, supporting Holland’s (1995) argument of stabilising central bank behaviour. Conversely, there is evidence that high inflation leads to elevated inflation uncertainty, in accordance with Friedman’s (1977) hypothesis. Inflation uncertainty does not have a significant impact on economic growth in South Africa. However, inflation does have an adverse effect on economic growth, whilst economic growth exerts a positive impact on the rate of inflation. Lastly, economic growth does not have any meaningful effect on inflation uncertainty.
- Full Text:
- Authors: Pretorius, Krüger
- Date: 2014-01-14
- Subjects: Inflation (Finance) , Economic development - South Africa , Monetary policy - South Africa
- Type: Thesis
- Identifier: uj:7880 , http://hdl.handle.net/10210/8771
- Description: M.Comm. (Financial Economics) , This dissertation examines the relationship between inflation, inflation uncertainty, and economic growth using quarterly data for South Africa covering the period 1960-2012. Inflation uncertainty is estimated using the Generalized Autoregressive Conditional Heteroscedasticity modelling framework. Granger methods are employed in order to investigate the interaction between inflation, inflation uncertainty, and economic growth. The presence of structural change is investigated through dummy variables representing changes in monetary policy regime. No evidence is found of any significant structural change in either inflation or inflation uncertainty. Granger results indicate that inflation uncertainty has a negative impact on inflation, supporting Holland’s (1995) argument of stabilising central bank behaviour. Conversely, there is evidence that high inflation leads to elevated inflation uncertainty, in accordance with Friedman’s (1977) hypothesis. Inflation uncertainty does not have a significant impact on economic growth in South Africa. However, inflation does have an adverse effect on economic growth, whilst economic growth exerts a positive impact on the rate of inflation. Lastly, economic growth does not have any meaningful effect on inflation uncertainty.
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Inflation targeting : an unrecognised dilemma for South Africa
- Authors: Zidel, Hillel L.
- Date: 2012-09-05
- Subjects: Inflation (Finance) , Monetary policy - South Africa , Inflation (Finance) - South Africa
- Type: Thesis
- Identifier: uj:9626 , http://hdl.handle.net/10210/7045
- Description: M.Comm. , The overall objective of this study was to determine the appropriateness of Inflation Targeting to South Africa, or of South Africa's suitability for Inflation Targeting. For that reason, I shall produce information that will aid in the determination of whether the South African Reserve Bank has been correct in their adoption of this framework, and to propose an alternative, more all-encompassing option. The research design used in this study in terms of Tripodi, Fellin and Meyer's (1982:40) classification can be termed as a hybrid of the exploratory and the quantitative-descriptive designs. Chapter 1 introduces the reader to the research paper. This chapter incorporates the rationale and importance of the study, its methodology, hypothesis, limitations, aims, and referencing method. It sets out clear aims and objectives for the thesis while providing an overview of the material. To facilitate the analysis of Inflation Targeting in South Africa it was vital to have a clear and accurate understanding of what Inflation Targeting is. The definition and an analysis of the definition are covered in Chapter 2. As other authors have detailed this aspect voluminously, it is just dealt with summarily in this section. Chapter 3 discusses the requirements for Inflation Targeting as set out by the authorities. These factors are primarily of a technical nature. While the information garnered for this section is invaluable, it is inadequate in isolation. Countries' individual circumstances play an important role, and need to be considered along with the purely technical requirements for Inflation Targeting. This chapter is important in the analysis as it provides an important yardstick for the analysis of the requirements in South Africa. In order to attain an enhanced grasp of Inflation Targeting and its potential impact and effects on South Africa, it is imperative to take lessons from other countries where the framework has been implemented. Chapter 4 analyses international experiences with Inflation Targeting, with the main aim of learning from the experience of developed and, more importantly, developing nations. The paper then moves into the most important section: that of South Africa. Once a full understanding of what Inflation Targeting involves is obtained, both theoretically and empirically, we are in a position to consider where South Africa fits in. South African monetary policy is evaluated briefly, while the technical requirements of Inflation Targeting are analysed in their South African context. Various problems are discussed with the applicability of the framework to South Africa. The later part of this section analyses technical and socio-political complicating factors, while a description is provided of a suggested alternative framework. The final chapter concludes that South Africa is, indeed, almost certainly "less than suitable" for Inflation Targeting and suggests that a more holistic framework of a "GEAR-type" nature is more likely to be appropriate to a country with the uniqueness of South Africa.
- Full Text:
- Authors: Zidel, Hillel L.
- Date: 2012-09-05
- Subjects: Inflation (Finance) , Monetary policy - South Africa , Inflation (Finance) - South Africa
- Type: Thesis
- Identifier: uj:9626 , http://hdl.handle.net/10210/7045
- Description: M.Comm. , The overall objective of this study was to determine the appropriateness of Inflation Targeting to South Africa, or of South Africa's suitability for Inflation Targeting. For that reason, I shall produce information that will aid in the determination of whether the South African Reserve Bank has been correct in their adoption of this framework, and to propose an alternative, more all-encompassing option. The research design used in this study in terms of Tripodi, Fellin and Meyer's (1982:40) classification can be termed as a hybrid of the exploratory and the quantitative-descriptive designs. Chapter 1 introduces the reader to the research paper. This chapter incorporates the rationale and importance of the study, its methodology, hypothesis, limitations, aims, and referencing method. It sets out clear aims and objectives for the thesis while providing an overview of the material. To facilitate the analysis of Inflation Targeting in South Africa it was vital to have a clear and accurate understanding of what Inflation Targeting is. The definition and an analysis of the definition are covered in Chapter 2. As other authors have detailed this aspect voluminously, it is just dealt with summarily in this section. Chapter 3 discusses the requirements for Inflation Targeting as set out by the authorities. These factors are primarily of a technical nature. While the information garnered for this section is invaluable, it is inadequate in isolation. Countries' individual circumstances play an important role, and need to be considered along with the purely technical requirements for Inflation Targeting. This chapter is important in the analysis as it provides an important yardstick for the analysis of the requirements in South Africa. In order to attain an enhanced grasp of Inflation Targeting and its potential impact and effects on South Africa, it is imperative to take lessons from other countries where the framework has been implemented. Chapter 4 analyses international experiences with Inflation Targeting, with the main aim of learning from the experience of developed and, more importantly, developing nations. The paper then moves into the most important section: that of South Africa. Once a full understanding of what Inflation Targeting involves is obtained, both theoretically and empirically, we are in a position to consider where South Africa fits in. South African monetary policy is evaluated briefly, while the technical requirements of Inflation Targeting are analysed in their South African context. Various problems are discussed with the applicability of the framework to South Africa. The later part of this section analyses technical and socio-political complicating factors, while a description is provided of a suggested alternative framework. The final chapter concludes that South Africa is, indeed, almost certainly "less than suitable" for Inflation Targeting and suggests that a more holistic framework of a "GEAR-type" nature is more likely to be appropriate to a country with the uniqueness of South Africa.
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The purpose and transparency of the repurchase agreement in the South African financial system
- Authors: Steenkamp, Juanita.
- Date: 2012-08-17
- Subjects: Repurchase agreements - South Africa. , Monetary policy. , Monetary policy - South Africa , Inflation (Finance)
- Type: Thesis
- Identifier: uj:2625 , http://hdl.handle.net/10210/6072
- Description: M.Comm. , Under the previous accommodation system the monetary policy of the South African Reserve Bank failed to operate by means of open market transactions, and interest rate movements was solely the discretion of the South African Reserve Bank and was driven by means of the traditional Bank rate. The need for a more efficient and transparent accommodation system that is based on open market transactions and determined by demand and supply of liquidity was evident, and therefore the introduction of the repurchase agreement system in March 1998 was unavoidable. The ultimate objective of monetary policy is to achieve price stability, i.e. to ensure that the Reserve Bank has a goal of maintaining inflation at a level that would be more or less in line with the average rate of inflation in the economies of South Africa's major trading partners and international competitors. It is important that the Reserve Bank enhances transparency for the effective operation of an inflation-targeting framework. Transparency introduces predictability and helps to ensure that market expectations are consistent with the objective of price stability. The level of interest rates in a country can influence price stability directly. A transparent monetary policy will mean that changes in short-term interest rates should not surprise the market. Markets should anticipate decisions taken by the Reserve Bank and therefore transparency should promote the predictability of monetary policy. Since its implementation, the current accommodation system (repurchase agreement) has raised some concerns regarding transparency. The government's new monetary policy framework of inflation targeting also has some limitations that can influence the achieving of such targets. The one influences the other, and if interest rates and inflation is not managed transparently, it will have a severe impact on the overall efficiency of monetary policy in South Africa.
- Full Text:
- Authors: Steenkamp, Juanita.
- Date: 2012-08-17
- Subjects: Repurchase agreements - South Africa. , Monetary policy. , Monetary policy - South Africa , Inflation (Finance)
- Type: Thesis
- Identifier: uj:2625 , http://hdl.handle.net/10210/6072
- Description: M.Comm. , Under the previous accommodation system the monetary policy of the South African Reserve Bank failed to operate by means of open market transactions, and interest rate movements was solely the discretion of the South African Reserve Bank and was driven by means of the traditional Bank rate. The need for a more efficient and transparent accommodation system that is based on open market transactions and determined by demand and supply of liquidity was evident, and therefore the introduction of the repurchase agreement system in March 1998 was unavoidable. The ultimate objective of monetary policy is to achieve price stability, i.e. to ensure that the Reserve Bank has a goal of maintaining inflation at a level that would be more or less in line with the average rate of inflation in the economies of South Africa's major trading partners and international competitors. It is important that the Reserve Bank enhances transparency for the effective operation of an inflation-targeting framework. Transparency introduces predictability and helps to ensure that market expectations are consistent with the objective of price stability. The level of interest rates in a country can influence price stability directly. A transparent monetary policy will mean that changes in short-term interest rates should not surprise the market. Markets should anticipate decisions taken by the Reserve Bank and therefore transparency should promote the predictability of monetary policy. Since its implementation, the current accommodation system (repurchase agreement) has raised some concerns regarding transparency. The government's new monetary policy framework of inflation targeting also has some limitations that can influence the achieving of such targets. The one influences the other, and if interest rates and inflation is not managed transparently, it will have a severe impact on the overall efficiency of monetary policy in South Africa.
- Full Text:
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