Browsing by Author "Kotze, Kevin"
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- ItemOpen AccessAsymmetric effects of monetary policy: A Markov-Switching SVAR approach(2021) Gaopatwe, Molebogeng Patience; Kotze, KevinThis paper examines the effects of monetary policy on macroeconomic variables in Botswana as a developing small macro-economy using the Markov-switching structural vector autoregressive (MS-SVAR) framework, utilising time-series data from 1994: Q1 to 2019: Q4. The study makes use of bank rate (interest rate), inflation and output gap. The first model is a structural vector autoregressive (VAR) model that takes the form employed by Rudebusch and Svensson (1999), whilst the second one makes use of the same structure but includes Markov switching in the policy rule (i.e., Markov switching SVAR). Regime-switching models can effectively describe the data generating process when considering both in-sample and out of sample evaluations compared to the linear models, which submerge the structural changes that have occurred in the economy over the years. The results from the SVAR shows that monetary policy has a symmetric impact on the output gap and inflation. Therefore, it can be noted that non-linearities in the structural model do not necessarily imply asymmetric effects of shocks. Furthermore, the MS-SVAR shows that the Central Bank of Botswana responds differently to policy shocks in different regimes. This underscores the importance of regime-switching features in providing a more accurate description of the economy.
- ItemOpen AccessComparing GARCH models for gold price data, using a statistical loss function approach and an option pricing approach(2011) Cuningham, Blake; Kotze, KevinDerivative instruments that rely on the price of gold are traded in large volumes. A significant number of these instruments are influenced by the volatility of gold price movements. Hence, it is important to understand the volatility of this commodity when developing successful trading and hedging strategies. In this thesis, use is made of various GARCH models that are evaluated using both in-sample and out-of-sample criteria.
- ItemOpen AccessConnectedness of the African Equity Markets: A Time-Frequency Spillover Analysis(2019) Claassen, Cecily; Kotze, KevinThis paper analyses return and volatility spillovers across the five largest and oldest African equity markets, namely: South Africa, Morocco, Egypt, Nigeria and Tunisia. The time-domain approach of Diebold and Yilmaz (2012) and the frequency-domain approach of Barunik and Khrehlik (2018) are employed to measure the spillovers empirically, in order to ascertain the nature and degree of interdependence within African stock markets. The findings suggest that these African equity markets’ total return connectedness index is relatively moderate at an average of 9.7% over the full sample period between 11 January 2002 and 2 November 2018. However, the total volatility connectedness index is much higher at 19.9% on average, which is also larger than many other findings in the literature. These results suggest that South Africa and Egypt are usually the net transmitters of both return and volatility spillovers, while Morocco, Nigeria and Tunisia are usually the net receivers of these spillovers. A subsequent rolling window analysis is then used to show that both return and volatility interconnectivity has increased over time. There are also a number of spikes that occurred during periods of crisis, as these measures are particularly high during the global financial crisis of 2008 and 2009. To consider the robustness of these results, various different frequency windows have been used, where it is noted that although the central tenant of the above findings are present across all frequency windows, the exact measure for the degree of African equity market connectedness is contingent on the frequency under consideration.
- ItemRestrictedForecasting performance of an estimated DSGE model for the South African economy(Wiley, 2011) Alpanda, Sami; Kotze, Kevin; Woglom, GeoffreyWe construct a small open-economy New Keynesian dynamic stochastic general equilibrium (DSGE) model for South Africa with nominal rigidities, incomplete international risk sharing and partial exchange rate pass-through. The parameters of the model are estimated using Bayesian methods, and its out-of-sample forecasting performance is compared with Bayesian vector autoregression (VAR), classical VAR and random-walk models. Our results indicate that the DSGE model generates forecasts that are competitive with those from other models, and it contributes statistically significant information to combined forecast measures.
- ItemOpen AccessForecasting the South African rand 's variance and covariance using conditional heteroskedastic and realized volatility models(2013) Sumter, Christopher; Kotze, KevinIncludes abstract. Includes bibliographical references.
- ItemOpen AccessModelling intermediate care services as part of an integrated care pathway(2016) Wilson, Nicola Ann; Gilson, Lucy; Kotze, KevinThis study explores the implications of implementing enhanced or redesigned intermediate care initiatives in the Western Cape of South Africa from the 2014/15 financial year onwards. Using a dynamic modelling methodology, we developed an empirical model of an integrated care system to explain the linkages, relationships and interactions among service components and analyse the implications of one of the proposed Healthcare 2030 policy interventions - intermediate care - on hospital admissions, waiting times and length of stay of all patients. We tested and compared a number of alternative intervention points using a simulation model parameterised with service component data from the Department of Health Information Systems. The findings from the study show the inconsistencies between the perceived structure and the available data from the respective service components that describe the resultant behavioural effects on an integrated care system, especially when care pathways cross organisational boundaries. The main managerial learning was around the existence and nature of organisational boundaries that require joint working and sharing of information. We conclude from the simulation results for the alternative scenarios tested that the implementation of enhanced or redesigned intermediate care initiatives can moderate the rate of growth in the demand for hospital services by reducing a percentage of hospital readmissions.
- ItemOpen AccessMonetary policy in low income countries: the case of Uganda(2017) Anguyo, Francis Leni; Kotze, Kevin; Gupta, RanganThis thesis addresses interrelated issues that influence the implementation of monetary policy in low income countries (LICs). These include the role of inflation persistence, financial frictions and the potential impact of regime-changes or large shocks. The analysis is applied to data for the Ugandan economy. Chapter 3 extends the quantile regression approach to investigate inflation persistence in LICs. The results suggest mean-reversion for the whole sample, however, there is evidence of asymmetric mean-reversion within specific quantiles. In addition, it is noted that the level of persistence increased after 2006 and during the inflation-targeting period. The study also suggests that a measure of core inflation that is derived from wavelet techniques appears to provide a useful measure of this variable. Chapter 4 considers the role of financial frictions in Uganda. It makes use of a dynamic stochastic general equilibrium (DSGE) model that incorporates several small open-economy features. The model parameters are estimated with the aid of Bayesian techniques using quarterly macroeconomic data. The results suggest that the central bank currently responds to changes in the interest rate spread and that it may be possible to derive a more favourable sacrifice ratio by making use of a slightly more aggressive response to macroeconomic developments. Chapter 5 employs a Markov-switching DSGE model to consider the possibility of regime-switching behaviour. Two variants of regime-switching models are considered: One that incorporates regime-switching features in the monetary policy rule (only) and another that incorporates regime-switching features in both the monetary policy rule and in the volatility of the shock processes. Most of the parameters are again estimated with the aid of Bayesian techniques. The results suggest that the model parameters do not remain constant over the two regimes and the transition probabilities appear to capture important economic events. In addition, the out-of-sample evaluation suggests that the regime-switching models may provide a more accurate description of the data generating processes.
- ItemOpen AccessThe role of exchange rate in small open economies : the case of Tanzania(2015) Mtenga, Threza Louis; Abraham, Haim; Ellyne, Mark; Kotze, KevinThis thesis addresses exchange rate behaviour in a de-facto partially dollarized economy. Over the past two decades the Tanzanian Shilling has been increasingly displaced by the United States dollar. This change has been prompted by instability of the local currency, and by the practices of foreign firms, which have used a dual pricing system at rates disadvantageous to the local currency. The implications of Tanzania's dollarization are traced through three related investigations: whether theTanzania Shilling to United States Dollar exchange rate overshoots, whether it has impacted the monetary transmission mechanism, and whether dollarization has substantively affected the pattern of Tanzania's foreign trade. The first study uses the Structural Vector Autoregression to test if the overshooting hypothesis holds for the TZS-USD exchange rate.The results suggest that foreign currency deposits are encouraged by the volatility of the exchange rate.In addition it is noted that the exchange rate demonstrates delayed overshooting, while a contractionary monetary policy leads to appreciation in the exchange rate for at least a year before returning to equilibrium. The determinants of the exchange rate in Tanzania are trade openness, real interest differentials, labour productivity and government expenditure. The second study uses a Bayesian Vector Autoregression to investigate the monetary transmission mechanism in the presence of dollarization. The results indicate that positive shocks on the interest rate contract money supply, which leads to lower output growth and inflation, while the exchange rate appreciates. The degree of dollarization also has a negative impact on the monetary supply of the local currency, as the central bank seeks to maintain a relatively constant rate of total money supply. This has the effect of lowering the inflation and interest rates, and is also associated with further depreciation of the exchange rate. The positive shock on the exchange rate (depreciation) is associated with an increase in dollarization.The aggregate demand shock fuels inflation and, in Tanzania's case, it has increased money supply, due to the persistent demand for real monetary balances. The third study uses a Dynamic Stochastic General Equilibrium to describe the conduct of monetary policy in a small, open, and partially dollarized Tanzanian economy. The structure of the model incorporates the expectations of agents and the dynamic relationships are explained in terms of structural representations that characterize the behaviour of the firm, household and central bank. The parameters in the model are estimated with Bayesian techniques, after it has been applied to Tanzanian data. The effects of individual shocks, including those that may be used to describe the conduct of monetary policy, are then considered. These simulations suggest that despite the existence of partial dollarization in the Tanzanian economy, monetary policy has important, short-term, real effects. The fourth study uses an Autoregressive Distributed Lag approach to investigate the short and long run exchange rate sensitivity of foreign trade. Principal components analysis is also used to reduce the dimension of the dataset. It finds evidence that the depreciation of the Shilling typically has an immediate positive impact on the trade balance, and exchange rate depreciation increases the trade balance in both the short and long run. However, exports show signs that support the J-curve hypothesis, though the associated parameters are not significant. Imports are not reduced by a rise in the Shilling, as traditional theory would suggest. This is ascribed to the country's de-facto partial dollarization. Since over 40 per cent of money supply arecurrently held in dollar denominated accounts, trade is largely immune to domestic currency fluctuations. This study also notesthat the use of foreign currency has tended to rise during periods of substantial economic growth. Although no causality is argued, this does suggest that the parallel use of foreign and domestic currencies is not detrimental to Tanzania's economic growth.
- ItemOpen AccessSpillovers in the foreign exchange market a study of volatility and returns in emerging market currencies(2012) Vavli, Hakon; Kotze, KevinThis paper provides a rigorous investigation of spillover effects in exchange rate returns and volatility. It considers the construction of a spillover index for advanced and emerging market currencies including the South African rand. The results suggest that the spillover index of exchange rate returns have increased steadily over time and that it exhibits moderate reactions to economic events. In contrast, spillovers in total observed volatility (measured by squared returns) display evidence of considerable reactions to economic events and no apparent change in the trend.
- ItemOpen AccessTrade linkages and growth in South Africa: an SVAR analysis(2019) Liu, Xinman; Kotze, KevinThis paper investigates the vulnerability of South Africa to the shocks that originate from its major trading partners over time using a structural vector autoregressive framework. We examine the impact of shocks emanating from the EU, the US, China, Japan, India and Brazil on South Africa’s output growth through both direct and indirect trade linkages, by considering the changing trade patterns from 1996 to 2017. The results suggest that the South African economy has become more integrated with emerging economies. Furthermore, China has increased its impact on the output growth of the other sample economies through trade linkages, which implies that developments in China are of increasing importance to other economies. The US and the EU are still dominated in propagating shocks despite their declining impact on the output growth of other economies in this sample.