Factor-augmented VARs (FAVARs) have combined standard VARs with factor analysis to exploit large data sets in the study of monetary policy. FAVARs enjoy a number of advantages over VARs: they allow a better identification of the monetary policy shock; they can avoid the use of a single variable...

This paper integrates imposing a factor structure on residuals in vector autoregressions (VARs) into structural VAR analysis. Identification, estimation and testing procedures are discussed. The paper applies this approach to the well-known problem of studying the effects of monetary policy in...

This paper investigates the asymmetric effects of monetary shocks when the=20 impact of monetary policy on real activity works through state-dependent=20 variables. We use a nonlinear model, the multiple regime smooth transition=20 autoregressive model, that allows the effects of shocks to vary...

Inflation is a far from homogeneous phenomenon, but this fact is ignored in most work on consumer price inflation. Using a novel methodology grounded in theory, the ten sub-components of the consumer price index (excluding mortgage interest rates, or CPIX) for South Africa are modeled separately...

In the recent SVAR literature, the liquidity effect has been studied by imposing a variety of identifying restrictions required under the assumption that the SVAR fundamental disturbances are homoscedastic. Using typical SVAR processes, we first show that this assumption is not supported by the...

We build a 4-equation model of the inflation process in South Africa (which has recently adopted inflation targeting), including the exchange rate, consumer prices, producer price, and import prices. This provides useful information on the speed and extent of exchange rate pass- through, and...

In this paper, we develop a parametric test procedure for multiple horizon "Granger" causality and apply the procedure to the well established problem of determining causal patterns in aggregate monthly U.S. money and output. As opposed to most papers in the parametric causality literature, we...

This paper develops and estimates an unobserved components model for purposes of monetary policy analysis and inflation targeting in a small open economy. Cyclical components are modeled as a multivariate linear rational expectations model of the monetary transmission mechanism, while trend...

This paper analyzes a model of investment with fixed investment costs and capital market imperfections. In this model finance influences the level of capital firms hold, as well as the frequency at which they invest. In consequence investment reacts nonlinearly with respect to shocks to...

We investigate convergence towards Purchasing Power Parity (PPP) within the Euro Zone and between the Euro Zone and its main partners using panel data methods that incorporate serial and contemporaneous correlation. We find strong rejections of the unit root hypothesis, and therefore evidence of...