In this paper we test the forecasting ability of three estimated financial conditions indices (FCIs) with respect to key macroeconomic variables of output growth, inflation and interest rates. We do this by forecasting the aforementioned macroeconomic variables based on the information contained...

This paper presents a comprehensive literature review of the theoretical and empirical developments that have taken place over the last two decades in an attempt to address the exchange rate puzzles. Specifically, we discuss non-linear and Bayesian econometric techniques, Dynamic General...

The market microstructure approach has been applied to the three major puzzles of exchange rate economics: the forward bias puzzle, the excess volatility puzzle, and the exchange rate determination puzzle. It claims that the imbalances between ‘buyer-initiated and seller-initiated trades’ in...

This paper analyses the intertemporal hedging demand for stocks and bonds in South Africa (SA), the United Kingdom (UK) and the United States (US). The analysis is done using an approximate solution method for the optimal consumption and wealth portfolio problem of an infinitely long-lived...

The global financial crisis that began in 2007-08 demonstrated how severe the impact of financial markets’ stress on real economic activity can be. In the wake of the financial crisis policy-makers and decision-makers across the world identified the critical need for a better understanding of...

This paper utilises various recently developed econometric methods to obtain better approximations to the half-life for real exchange rates of ten South African Development Community (SADC) countries and to generate confidence intervals for half-life deviations from the purchasing power parity...

Active credit portfolio management is becoming a central part of capital and credit management within the banking industry. Stimulated by the Basel II capital accord the estimation of risk sensitive credit and capital management is central to success in an increasingly competitive environment....

This paper attempts to provide evidence indicating that the Purchasing Power Parity (PPP) puzzle is becoming less of a puzzle. It present the results of Augmented Dickey-Fuller (ADF) test, nonlinear tests of nonstationarity, and Bayesian unit root tests, applied to ten SADC countries. The...

This paper utilises “a class test for fractional integration” associated with the seminal contribution of Hinich and Chong (2007) to appraise the possibility that South African Development Community (SADC) real exchange rates can be treated as long memory processes. The justification for...

The importance of financial instability for the world economy has been severely demonstrated since the 2007/08 global financial crisis, highlighting the need for a better understanding of financial conditions. We use a financial conditions index (FCI) for South Africa previously constructed from...