We develop a structural cointegrated vector autoregressive (VAR) model with weakly exogenous foreign variables, suitable for a small open economy like South Africa. This type of model is known as an augmented vector error correction model (VECM), referred to by VECX*. We compile the foreign...

This study determines whether the global vector autoregressive (GVAR) approach provides better forecasts of key South African variables than a vector error correction model (VECM) and a Bayesian vector autoregressive (BVAR) model augmented with foreign variables. The paper considers both a small...

We study the response of South African monetary policy decisions to foreign monetary policy shocks. We estimate the extent of foreign monetary policy pass-through by augmenting standard Taylor rules and comparing the results within the context of a Global New-Keynesian Dynamic Stochastic General...

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 investigates the factors that drive and constrain remittance inflows into SubSaharan Africa (SSA) using annual data for 35 SSA countries from 1980 to 2008, generalised method of moments by Arellano and Bover (1995) and LSDV with Driscoll and Kraay (1998) corrected standard errors. We...

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...

Traditionally, the literature on forecasting exchange rates with many potential predictors have primarily only accounted for parameter uncertainty using Bayesian Model Averaging (BMA). Though BMA-based models of exchange rates tend to outperform the random walk model, we show that when...