Analysis of the existence of the Phillips curve, Okun’s law and Taylor rule in the Zambian economy
- Authors: Chella, Siame Nampasa
- Date: 2020
- Subjects: Unemployment -- Effect of inflation -- Mathematical models --Zambia
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/49783 , vital:41800
- Description: The objective for this study was to explore the relationship between inflation and growth with an understanding of the effects of unemployment on growth. The primary objective of this paper was to investigate the existence of Phillips Curve, Okun’s Law, and Taylor Rule in Zambia on the basis that Zambia is a youthful economy, with a growing population, which is expected to temper with unemployment rates, as an increase in the supply of labour might be too high for the demand for jobs available. To be specific, the study aims at determining the relationship between inflation and growth and seeks to understand what policy measures have been undertaken to curb inflation and reduce unemployment in Zambia. To achieve this, a quantitative research was undertaken using the ARDL cointegration model in conjunction with sensitivity tests to cater for structural changes in the economy with 2007 standing as the break point, as well as paying attention to the fact that different policy regimes employed during the course of the data covered, that being, 1996 to 2017, would affect that rates of unemployment, inflation and growth of the country, across period under review. The study revealed that Zambia faces a Hybrid New Keynesian Phillips Curve during the period under study which is dominated by a mixture of both back-ward and forward-looking aspects of inflation. This specifically, paints the effects of inflation persistence as well future expectations of inflation on growth. Further, a cointegration relationship was established between unemployment and output, while Taylor principles were found not to apply to the Zambian economy, which have proved in other economies to be foundation blocks for good economic growth and as such significant to both fiscal and monetary policy authorities of the economy. The researcher therefore recommends that Zambian policy makers, that is, both the fiscal and the monetary authorities, work together in order to attain minimal and optimal levels of inflation to help achieve a conducive economic environment for the country.
- Full Text:
- Date Issued: 2020
- Authors: Chella, Siame Nampasa
- Date: 2020
- Subjects: Unemployment -- Effect of inflation -- Mathematical models --Zambia
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10948/49783 , vital:41800
- Description: The objective for this study was to explore the relationship between inflation and growth with an understanding of the effects of unemployment on growth. The primary objective of this paper was to investigate the existence of Phillips Curve, Okun’s Law, and Taylor Rule in Zambia on the basis that Zambia is a youthful economy, with a growing population, which is expected to temper with unemployment rates, as an increase in the supply of labour might be too high for the demand for jobs available. To be specific, the study aims at determining the relationship between inflation and growth and seeks to understand what policy measures have been undertaken to curb inflation and reduce unemployment in Zambia. To achieve this, a quantitative research was undertaken using the ARDL cointegration model in conjunction with sensitivity tests to cater for structural changes in the economy with 2007 standing as the break point, as well as paying attention to the fact that different policy regimes employed during the course of the data covered, that being, 1996 to 2017, would affect that rates of unemployment, inflation and growth of the country, across period under review. The study revealed that Zambia faces a Hybrid New Keynesian Phillips Curve during the period under study which is dominated by a mixture of both back-ward and forward-looking aspects of inflation. This specifically, paints the effects of inflation persistence as well future expectations of inflation on growth. Further, a cointegration relationship was established between unemployment and output, while Taylor principles were found not to apply to the Zambian economy, which have proved in other economies to be foundation blocks for good economic growth and as such significant to both fiscal and monetary policy authorities of the economy. The researcher therefore recommends that Zambian policy makers, that is, both the fiscal and the monetary authorities, work together in order to attain minimal and optimal levels of inflation to help achieve a conducive economic environment for the country.
- Full Text:
- Date Issued: 2020
The impact of good news and bad news on South Africa’s sectoral stock return volatility: an asymmetric GARCH analysis
- Authors: Muzinda, Edmond Toreva
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/6425 , vital:21108
- Description: This study explores the impact of good news and bad news on South Africa’s sectoral stock return volatility using an asymmetric GARCH analysis. Understanding the different impact of news on stock return volatility in different economic sectors has important implications for investors’ risk management practices, portfolio allocation strategies and asset pricing. The study employs data of daily closing prices for nine sectors and three benchmark indices for the period 2nd January 1997 - 17th August 2016. The data was split into sub-samples of pre-, during and post-global financial crisis, as well as the overall sample period. The incorporation of sub-samples was to help explain the outcomes of the overall sample period. To capture the different impact of good news and bad news on stock return volatility for each sector, asymmetric GARCH models namely, TGARCH and EGARCH were employed. The findings from this study revealed that volatility asymmetry was present in all sectors and benchmark indices of South African equity market. Bad news had more impact on stock return volatility for all sectors except the Oil and Gas sector, than good news of the same magnitude. In the Oil and Gas sector, good news was found to have an amplified effect on return volatility compared with bad news of the same magnitude. High volatility persistence was also found to be present in the Consumer goods, Financials, Industrials, All-share index and Mid-cap index. High differential impact of good and bad news were found in the Industrials, Financials, Basic materials, Consumer goods and the All-share index. Since the main objective of this study was to provide explanations of volatility asymmetry found in the South African sectors, the following were proposed as possible explanations of the findings. Within sectors, volatility asymmetry was explained by financial leverage, the role of the media, loss-averse investors and the behaviour of traders (overconfidence and extrapolation bias). Volatility asymmetry across sectors was explained by information flow, the uneven distribution of information by the media, investor sentiments, investor expectations and trading volumes. Overall, the results indicate that the stock return volatility of individual sectors of the South African equity market is driven mainly by bad news (except for Oil and Gas) and that leverage effects exist in all the sectors and in the benchmark indices.
- Full Text:
- Date Issued: 2017
- Authors: Muzinda, Edmond Toreva
- Date: 2017
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10962/6425 , vital:21108
- Description: This study explores the impact of good news and bad news on South Africa’s sectoral stock return volatility using an asymmetric GARCH analysis. Understanding the different impact of news on stock return volatility in different economic sectors has important implications for investors’ risk management practices, portfolio allocation strategies and asset pricing. The study employs data of daily closing prices for nine sectors and three benchmark indices for the period 2nd January 1997 - 17th August 2016. The data was split into sub-samples of pre-, during and post-global financial crisis, as well as the overall sample period. The incorporation of sub-samples was to help explain the outcomes of the overall sample period. To capture the different impact of good news and bad news on stock return volatility for each sector, asymmetric GARCH models namely, TGARCH and EGARCH were employed. The findings from this study revealed that volatility asymmetry was present in all sectors and benchmark indices of South African equity market. Bad news had more impact on stock return volatility for all sectors except the Oil and Gas sector, than good news of the same magnitude. In the Oil and Gas sector, good news was found to have an amplified effect on return volatility compared with bad news of the same magnitude. High volatility persistence was also found to be present in the Consumer goods, Financials, Industrials, All-share index and Mid-cap index. High differential impact of good and bad news were found in the Industrials, Financials, Basic materials, Consumer goods and the All-share index. Since the main objective of this study was to provide explanations of volatility asymmetry found in the South African sectors, the following were proposed as possible explanations of the findings. Within sectors, volatility asymmetry was explained by financial leverage, the role of the media, loss-averse investors and the behaviour of traders (overconfidence and extrapolation bias). Volatility asymmetry across sectors was explained by information flow, the uneven distribution of information by the media, investor sentiments, investor expectations and trading volumes. Overall, the results indicate that the stock return volatility of individual sectors of the South African equity market is driven mainly by bad news (except for Oil and Gas) and that leverage effects exist in all the sectors and in the benchmark indices.
- Full Text:
- Date Issued: 2017
The impact of exchange rate volatility on manufacturing production : a case study of South Africa
- Authors: Dube, Ziphozethu
- Date: 20
- Subjects: Foreign exchange rates -- South Africa Manufacturing industries -- South Africa Industrial productivity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/8294 , vital:32193
- Description: The study examined the impact of exchange rate volatility on manufacturing production for the period of 1994 - 2015 in South Africa. The study evaluated the literature on exchange rate volatility and manufacturing production which was conducted and resulted into specification of an empirical model. The Autoregressive Distributive Lag (ARDL) was employed towards deducing the relationship of exchange rate volatility and manufacturing production. This study made use of monthly data to examine the relationship of exchange rate volatility and manufacturing production. However, the data frequency selected, ensured an adequate number of observations and results revealed that exchange rate volatility has a negative relationship with manufacturing production in the long run, nonetheless considering South Africa as an export economy the results were consistent with Ayinde (2014) who found that this relationship is seen to exist. A positive relationship was noted within the short run period. The unstable business environment in South Africa has been worsened by the political climate and unstable policies that has a ripple effect. Due to this aspect the study recommended the need for stabilizer policies for monetary, fiscal, trade and exchange rate management. The government should properly manage the exchange rate and design suitable policies that will reduce the deviation of the exchange rate thereby encourage production. Exchange rate stability is viewed to be key for export-oriented manufacturing sectors in a macroeconomic environment. The South African economy has felt such heaviness of political unrest and polices that do not result in stability. It would be key for policymakers to be vigilant and implement such measures to get the economy ticking in the right direction.
- Full Text:
- Date Issued: 20
- Authors: Dube, Ziphozethu
- Date: 20
- Subjects: Foreign exchange rates -- South Africa Manufacturing industries -- South Africa Industrial productivity
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/8294 , vital:32193
- Description: The study examined the impact of exchange rate volatility on manufacturing production for the period of 1994 - 2015 in South Africa. The study evaluated the literature on exchange rate volatility and manufacturing production which was conducted and resulted into specification of an empirical model. The Autoregressive Distributive Lag (ARDL) was employed towards deducing the relationship of exchange rate volatility and manufacturing production. This study made use of monthly data to examine the relationship of exchange rate volatility and manufacturing production. However, the data frequency selected, ensured an adequate number of observations and results revealed that exchange rate volatility has a negative relationship with manufacturing production in the long run, nonetheless considering South Africa as an export economy the results were consistent with Ayinde (2014) who found that this relationship is seen to exist. A positive relationship was noted within the short run period. The unstable business environment in South Africa has been worsened by the political climate and unstable policies that has a ripple effect. Due to this aspect the study recommended the need for stabilizer policies for monetary, fiscal, trade and exchange rate management. The government should properly manage the exchange rate and design suitable policies that will reduce the deviation of the exchange rate thereby encourage production. Exchange rate stability is viewed to be key for export-oriented manufacturing sectors in a macroeconomic environment. The South African economy has felt such heaviness of political unrest and polices that do not result in stability. It would be key for policymakers to be vigilant and implement such measures to get the economy ticking in the right direction.
- Full Text:
- Date Issued: 20
The relationship between interest rates and inflation in South Africa : revisiting Fisher's hypothesis
- Mitchell-Innes, Henry Alexander
- Authors: Mitchell-Innes, Henry Alexander
- Date: 2006
- Subjects: Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:991 , http://hdl.handle.net/10962/d1002726 , Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Description: This thesis investigates the relationship between expected inflation and nominal interest rates in South Africa and the extent to which the Fisher effect hypothesis holds. The hypothesis, proposed by Fisher (1930), that the nominal rate of interest should reflect movements in the expected rate of inflation has been the subject of much empirical research in many industrialised countries. This wealth of literature can be attributed to various factors including the pivotal role that the nominal rate of interest and, perhaps more importantly, the real rate of interest plays in the economy. The validity of the Fisher effect also has important implications for monetary policy and needs to be considered by central banks. Few studies have been conducted in South Africa to validate this important hypothesis. The analysis uses the 3-month bankers’ acceptance rate and the 10-year government bond rate to proxy both short- and long-term interest rates. The existence of a long-run unit proportional relationship between nominal interest rates and expected inflation is tested using Johansen’s cointegration test. The data is analysed for the period April 2000 to July 2005 as the research aims to establish whether the Fisher relationship holds within an inflation targeting monetary policy framework. The short-run Fisher effect is not empirically verified. This is due to the effects of the monetary policy transmission mechanism and implies that short-term nominal interest rates are a good indication of the stance of monetary policy. A long-run cointegrating relationship is established between long-term interest rates and expected inflation. The long-run adjustment is less than unity, which can be attributed to the credibility of the inflation-targeting framework.
- Full Text:
- Date Issued: 2006
- Authors: Mitchell-Innes, Henry Alexander
- Date: 2006
- Subjects: Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:991 , http://hdl.handle.net/10962/d1002726 , Fisher effect (Economics) , Interest rates -- South Africa , Interest rates -- Effect of inflation -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions
- Description: This thesis investigates the relationship between expected inflation and nominal interest rates in South Africa and the extent to which the Fisher effect hypothesis holds. The hypothesis, proposed by Fisher (1930), that the nominal rate of interest should reflect movements in the expected rate of inflation has been the subject of much empirical research in many industrialised countries. This wealth of literature can be attributed to various factors including the pivotal role that the nominal rate of interest and, perhaps more importantly, the real rate of interest plays in the economy. The validity of the Fisher effect also has important implications for monetary policy and needs to be considered by central banks. Few studies have been conducted in South Africa to validate this important hypothesis. The analysis uses the 3-month bankers’ acceptance rate and the 10-year government bond rate to proxy both short- and long-term interest rates. The existence of a long-run unit proportional relationship between nominal interest rates and expected inflation is tested using Johansen’s cointegration test. The data is analysed for the period April 2000 to July 2005 as the research aims to establish whether the Fisher relationship holds within an inflation targeting monetary policy framework. The short-run Fisher effect is not empirically verified. This is due to the effects of the monetary policy transmission mechanism and implies that short-term nominal interest rates are a good indication of the stance of monetary policy. A long-run cointegrating relationship is established between long-term interest rates and expected inflation. The long-run adjustment is less than unity, which can be attributed to the credibility of the inflation-targeting framework.
- Full Text:
- Date Issued: 2006
Financial liberalization and financial instability in the selected SADC member countries
- Authors: Cele, Nolungelo Mercy
- Date: 2018
- Subjects: Finance Financial crises Finance -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/8978 , vital:34179
- Description: The study examined the impact of financial liberalization on financial instability in selected SADC member countries namely South Africa, Tanzania, Madagascar and Botswana for the period 1970-2012. The Panel data methodology was adopted to establish the relationship between the two variables. Impaired loans were used to capture financial instability and financial reforms to capture the level of financial liberalization. Credit to the private sector, government expenditure, GDP and inflation were utilised as control variables The empirical findings reveal that financial liberalization leads to financial instability. The financial reforms were found to be positively related with the impaired loans ratio in almost all the specifications. It was also found that financial instability intensifies when the global financial crisis is taken into consideration. This suggests that financial liberalization can therefore be another source of financial instability in the SADC countries. The empirical results imply that policy makers should focus on reforms that give due share to the regulations rather than just simply liberalizing the financial sector.
- Full Text:
- Date Issued: 2018
- Authors: Cele, Nolungelo Mercy
- Date: 2018
- Subjects: Finance Financial crises Finance -- Developing countries
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: http://hdl.handle.net/10353/8978 , vital:34179
- Description: The study examined the impact of financial liberalization on financial instability in selected SADC member countries namely South Africa, Tanzania, Madagascar and Botswana for the period 1970-2012. The Panel data methodology was adopted to establish the relationship between the two variables. Impaired loans were used to capture financial instability and financial reforms to capture the level of financial liberalization. Credit to the private sector, government expenditure, GDP and inflation were utilised as control variables The empirical findings reveal that financial liberalization leads to financial instability. The financial reforms were found to be positively related with the impaired loans ratio in almost all the specifications. It was also found that financial instability intensifies when the global financial crisis is taken into consideration. This suggests that financial liberalization can therefore be another source of financial instability in the SADC countries. The empirical results imply that policy makers should focus on reforms that give due share to the regulations rather than just simply liberalizing the financial sector.
- Full Text:
- Date Issued: 2018
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