- Title
- An empirical investigation of the demand for money in South Africa within the inflation-targeting era
- Creator
- Duah, Rachel
- Subject
- South Africa--Economic conditions http://id.loc.gov/authorities/subjects/sh85125465
- Subject
- Inflation targeting--South Africa
- Subject
- Monetary policy--South Africa
- Date Issued
- 2016
- Date
- 2016
- Type
- Master's theses
- Type
- text
- Identifier
- http://hdl.handle.net/10353/19465
- Identifier
- vital:43127
- Description
- The aim of the study is to empirically test the demand for money function in South Africa’s inflation-targeting era. This came from the fact that there have been a number of structural changes in the South African economy that have appeared to alter the relation between M3 and GDP and other macroeconomic variables. The study employed co-integration tests that showed one co-integrating equation which led to the application of the Vector-Error Correction Model (VECM) using the quarterly time series data covering the period from 2000-2015. The demand for money is investigated by estimating the real money balances as a function of Treasury Bills rate, income and total credit. Results showed that there is a negative relationship among Treasury Bills rate, income and real money balances. However, there is a positive relationship between real money balances and the total credit provided by the banking sector. The CUSUM and CUSUMQ tests are applied to examine the possibility of structural breaks in money demand functions, as well as parameter stability. The results of the study indicated that the estimated parameters for the short and long run dynamics of the real money demand function are stable. It was evident that Treasury bill rate, income and total credit can explain money balances and therefore can influence demand for money. The study recommends that the government ensures that there are economic activities such as employment creation which can then boost income levels so as to get a positive relationship between money balances and income. Through employment creation, there can be a reduction in borrowing. Treasury bill rates, being an effective monetary policy tool, can be used to direct monetary policy and also promote price stability. The study recommends that the South African Reserve Bank continue to improve the conditions in the financial sector. In this regard, the SARB and the government should strive to enact flexible policies that will boost financial credit and uplift business confidence.
- Description
- Thesis (MCom)(Economics) -- University of Fort Hare, 2016
- Format
- computer
- Format
- online resource
- Format
- application/pdf
- Format
- 1 online resource (119 leaves)
- Format
- Publisher
- University of Fort Hare
- Publisher
- Faculty of Management and Commerce
- Language
- English
- Rights
- University of Fort Hare
- Rights
- All Rights Reserved
- Rights
- Open Access
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UFH Department of Economics
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | SOURCE1 | Rachel Duah 2017.pdf | 1 MB | Adobe Acrobat PDF | View Details Download |