Thesis (MSc)--Stellenbosch University, 2014. / ENGLISH ABSTRACT: This work analysis the main macro-finance models of the term structure of interest rates that determines the joint dynamics of the term structure and the macroeconomic fundamentals under no-arbitrage approach. There has been a long search during the past decades of trying to study the relationship between the term structure of interest rates and the economy, to the extent that much of recent research has combined elements of finance, monetary economics, and the macroeconomics to analyse the term structure. The central interest of the thesis is based on two important notions. Firstly, it is picking up from the important work of Ang and Piazzesi (2003) model who suggested a joint macro- finance strategy in a discrete time affine setting, by also imposing the classical Taylor (1993) rule to determine the association between yields and macroeconomic variables through monetary policy. There is a strong intuition from the Taylor rule literature that suggests that such macroeconomic variables as in inflation and real activity should matter for the interest rate, which is the monetary policy instrument. Since from this important framework, no-arbitrage macro-finance approach to the term structure of interest rates has become an active field of cross-disciplinary research between financial economics and macroeconomics. Secondly, the importance of forecasting the yield curve using the variations on the Nelson and Siegel (1987) exponential components framework to capture the dynamics of the entire yield curve into three dimensional parameters evolving dynamically. Nelson-Siegel approach is a convenient and parsimonious approximation method which has been trusted to work best for fitting and forecasting the yield curve. The work that has caught quite much of interest under this framework is the generalized arbitrage-free Nelson-Siegel macro- nance term structure model with macroeconomic fundamentals, (Li et al. (2012)), that characterises the joint dynamic interaction between yields and the macroeconomy and the dynamic relationship between bond risk-premia and the economy. According to Li et al. (2012), risk-premia is found to be closely linked to macroeconomic activities and its variations can be analysed. The approach improves the estimation and the challenges on identication of risk parameters that has been faced in recent macro-finance literature. / AFRIKAANSE OPSOMMING: Hierdie werk ontleed die makro- nansiese modelle van die term struktuur van rentekoers pryse wat die gesamentlike dinamika bepaal van die term struktuur en die makroekonomiese fundamentele faktore in 'n geen arbitrage wêreld. Daar was 'n lang gesoek in afgelope dekades gewees wat probeer om die verhouding tussen die term struktuur van rentekoerse en die ekonomie te bestudeer, tot die gevolg dat baie onlangse navorsing elemente van nansies, monetêre ekonomie en die makroekonomie gekombineer het om die term struktuur te analiseer. Die sentrale belang van hierdie proefskrif is gebaseer op twee belangrike begrippe. Eerstens, dit tel op by die belangrike werk van die Ang and Piazzesi (2003) model wat 'n gesamentlike makro- nansiering strategie voorstel in 'n diskrete tyd a ene ligging, deur ook die klassieke Taylor (1993) reël om assosiasie te bepaal tussen opbrengste en makroekonomiese veranderlikes deur middel van monetêre beleid te imposeer. Daar is 'n sterk aanvoeling van die Taylor reël literatuur wat daarop dui dat sodanige makroekonomiese veranderlikes soos in asie en die werklike aktiwiteit moet saak maak vir die rentekoers, wat die monetêre beleid instrument is. Sedert hierdie belangrike raamwerk, het geen-arbitrage makro- nansies benadering tot term struktuur van rentekoerse 'n aktiewe gebied van kruis-dissiplinêre navorsing tussen nansiële ekonomie en makroekonomie geword. Tweedens, die belangrikheid van voorspelling van opbrengskromme met behulp van variasies op die Nelson and Siegel (1987) eksponensiële komponente raamwerk om dinamika van die hele opbrengskromme te vang in drie dimensionele parameters wat dinamies ontwikkel. Die Nelson-Siegel benadering is 'n gerie ike en spaarsamige benaderingsmetode wat reeds vertrou word om die beste pas te bewerkstellig en voorspelling van die opbrengskromme. Die werk wat nogal baie belangstelling ontvang het onder hierdie raamwerk is die algemene arbitrage-vrye Nelson-Siegel makro- nansiele term struktuur model met makroekonomiese grondbeginsels, (Li et al. (2012)), wat kenmerkend van die gesamentlike dinamiese interaksie tussen die opbrengs en die makroekonomie en die dinamiese verhouding tussen band risiko-premies en die ekonomie is. Volgens Li et al. (2012), word risiko-premies bevind om nou gekoppel te wees aan makroekonomiese aktiwiteite en wat se variasies ontleed kan word. Die benadering verbeter die skatting en die uitdagings van identi- sering van risiko parameters wat teegekom is in die afgelope makro- nansiese literatuur.

Thesis (MAdmin)--Stellenbosch University, 2000. / ENGLISH ABSTRACT: The study is devoted to the determination of an appropriate financial management and budgeting system to support a transforming South Africa. Given the challenges and opportunities presented by the new political dispensation, both locally and abroad, the evolution of financial management and budgeting systems is analysed. Specifically, elements of each budgetary system that stood the test of time to the present, are studied. International case studies of countries that have undergone (or are undergoing) the transformation process successfully, or otherwise, are fully discussed to serve as invaluable lessons and experience for South Africa on its quest for a smooth and swift transformation, to prevent it from ending up as just another unsuccessful transformation. This then serves as a broad foundation for an appropriate financial management and budgeting system which is proactive in the transformation process. South Africa will not reinvent the wheel. Unlike other countries that waited for transformation problems to fall upon them, the South African financial management and budgeting system manipulates the financial management policies. It achieves this by broadly defining the objectives to be achieved through prioritisation and reprioritisation, formulate clear strategies for shortterm, medium-term and long-term plans, goals, processes, functions and activities. It applies all the positive elements of input-orientated systems, activity/ performance measuring systems, objective/goal-orientated system, medium term expenditure framework and multi-year budgets studied and drawn from lessons and experience of other countries. South Africa's appropriate financial management and budgeting system is a broad crosswalk model vacillating between all systems from a broad definition of objectives, goals, processes and activities ending up with a strong financial management tool. / AFRIKAANSE OPSOMMING: Dié studie word gewy aan die daarstelling van 'n Geskikte Finansiële Bestuur en Begrotingstelsel om 'n veranderende Suid-Afrika te ondersteun. Teen die agtergrond van die uitdagings daargestel deur die nuwe politieke bestel word die revolusie van finansiële bestuur- en begrotingstelsels plaaslik en in die buiteland ontleed en in perspektief geplaas. Meer spesifiek is die elemente van elke begrotingstelsel wat die toets van die tyd deurstaan het, bestudeer. Internasionale studies van lande wat die veranderingsproses suksesvol ondergaan het (of tans daarmee besig is), of andersins, word volledig bespreek om as 'n onskatbare les en ondervinding vir Suid-Afrika in sy soektog na 'n gladde en vinnige transformasie te dien en om te verhoed dat dit op net nog 'n onsuksesvolle transformasie uitloop. Dit dien dan as 'n breë grondslag vir 'n Geskikte Finansiële Bestuur- en Begrotingstelsel wat proaktief in die Suid-Afrikaanse transformasieproses is. Suid-Afrika sal nie die wiel kan heruitvind nie. Anders as in ander lande wat op transformasieprobleme gewag het om hulle te tref, kan die Suid- Afrikaanse Finansiële Bestuur- en Begrotingstelsels finansiële bestuursbeleid pro-aktief ondersteun. Dit word bewerkstellig deur 'n omvattende bepaling van die mikpunte wat bereik moet word deur priorisering en herpriorisering van planne, doelwitte, prosesse, funksies en aktiwiteite op die kort, medium en lang termyn. Dit is moontlik indien al die positiewe elemente van verskillende finansiële bestuur- en begrotingsteiseis, soos bestudeer in en geleer uit ander lande se ondervindings toegepas word. Suid-Afrika se Finansiële Bestuur- en Begrotingstelsel behels 'n breë omvattende model wat put uit al die stelsels wat 'n bepaling van doelstellings, mikpunte, prosesse en aktiwiteite bevat ten einde te eindig met 'n sterk Finansiële Bestuurswerktuig.

Dissertation (PhD) -- University of Stellenbosch, 2000. / ENGLISH ABSTRACT: The Lucas critique states that if expectations are not explicitly dealt with, conventional econometric models are inappropriate for policy analyses, as their coefficients are not policy invariant. The inclusion of rational expectations in ·conventional model building has been the most common response to this critique. The concept of rational expectations has received several interpretations. In numerous studies, these expectations are associated with model consistent expectations in the sense that expectations and model solutions are identical. To derive a solution, these models require unique algorithms and assumptions regarding their terminal state, in particular when forward-looking expectations are present. An alternative that avoids these issues is the concept of weak rational expectations, which emphasises that expectation errors should not be systematic. Expectations are therefore formed on the basis of an underlying structure, but full knowledge of the model is not essential. The accommodation of this type of rational expectations is accomplished by means of an explicit specification of an expectations equation consistent with the macro econometric model's broad structure. The estimation of coefficients relating to expectations is achieved through an Instrumental Variable approach. In South Africa, monetary policy has been consistent and transparent in line with the recommendations of the De Kock Commission. This allows the modelling of the policy instrument of the South African Reserve Bank, i.e. the Bank rate, by means of a policy reaction function. Given this transparency in monetary policy, the accommodation of expectations of the Bank rate is essential in modelling the full impact of monetary policy and in avoiding the Lucas critique. This is accomplished through weak rational expectations, based on the reaction function of the Reserve Bank. The accommodation of expectations of a policy instrument also allows the modelling of anticipated and unanticipated policies as alternative assumptions regarding the expectations process can be made during simulations. Conventional econometric models emphasise the demand side of the economy, with equations focusing on private consumption, investment, exports and imports and possibly changes in inventories. In this study, particular emphasis in the model specification is also placed on the impact of monetary policy on government debt and debt servicing costs. Other dimensions of the model include the modelling of the money supply and balance of payments, short- and long-term interest rates, domestic prices, the exchange rate, the wage rate and employment as well as weakly rational expectations of inflation and the Bank rate. The model has been specified and estimated by usmg concepts such as cointegration and Error Correction modelling. Numerous tests, including the assessment of the Root Mean Square Percentage Error, have been employed to test the adequacy of the model. Similarly, tests are carried out to ensure weak rational expectations. Numerous simulations are carried out with the model and the results are compared to relevant alternative studies. The simulation results show that the reduction of inflation by means of only monetary policy could impose severe costs on the economy in terms of real sector volatility. / AFRIKAANSE OPSOMMING: Die Lucas-kritiek beweer dat konvensionele ekonometriese modelle nie gebruik kan word vir beleidsontleding nie, aangesien dit nie voorsiening maak vir die verandering in verwagtings wanneer beleidsaanpassings gemaak word nie. Die insluiting van rasionele verwagtinge in konvensionele ekonometriese modelle is die mees algemene reaksie op die Lukas-kritiek. Ten einde die praktiese insluiting van rasionele verwagtings III ekonometriese modelbou te vergemaklik, word in hierdie studie gebruik gemaak van sogenaamde "swak rasionele verwagtings", wat slegs vereis dat verwagtingsfoute me sistematies moet wees nie. Die beraming van die koëffisiënte van die verwagtingsveranderlikes word gedoen met behulp van die Instrumentele Veranderlikes-benadering. Monetêre beleid in Suid-Afrika was histories konsekwent en deursigtig in ooreenstemming met die aanbevelings van die De Kock Kommissie. Die beleidsinstrument van die Suid-Afrikaanse Reserwebank, naamlik die Bankkoers, kan gevolglik gemodelleer word met behulp van 'n beleidsreaksie-funksie. Ten einde die Lukas-kritiek te akkommodeer, moet verwagtings oor die Bankkoers egter ingesluit word wanneer die volle impak van monetêre beleid gemodelleer word. Dit word vermag met die insluiting van swak rasionele verwagtings, gebaseer op die reaksie-funksie van die Reserwebank. Sodoende kan die impak van verwagte en onverwagte beleidsaanpassings gesimuleer word. Konvensionele ekonometriese modelle beklemtoon die vraagkant van die ekonomie, met vergelykings vir verbruik, investering, invoere, uitvoere en moontlik die verandering in voorrade. In hierdie studie word daar ook klem geplaas op die impak van monetêre beleid op staatskuld en die koste van staatsskuld. Ander aspekte wat gemodelleer word, is die geldvoorraad en betalingsbalans, korttermyn- en langtermynrentekoerse, binnelandse pryse, die wisselkoers, loonkoerse en indiensneming, asook swak rasionele verwagtings van inflasie en die Bankkkoers. Die model is gespesifiseer en beraam met behulp van ko-integrasie en die gebruik van lang-en korttermynvergelykings. Die gebruiklike toetse is uitgevoer om die toereikendheid van die model te toets. Verskeie simulasies is uitgevoer met die model en die resultate is vergelyk met ander relevante studies. Die gevolgtrekking word gemaak dat die verlaging van inflasie deur alleenlik gebruik te maak van monetêre beleid 'n swaar las op die ekonomie kan lê in terme van volatiliteit in die reële sektor.

Thesis (PhD)--Stellenbosch University, 2014. / ENGLISH ABSTRACT: In the first essay of this thesis, a medium scale DSGE model is developed and estimated for the South African economy. When used for forecasting, the model is found to outperform private sector economists when forecasting CPI inflation, GDP growth and the policy rate over certain horizons. In the second essay, the benchmark DSGE model is extended to include the yield on South African 10-year government bonds. The model is then used to decompose the 10-year yield spread into (1) the structural shocks that contributed to its evolution during the inflation targeting regime of the South African Reserve Bank, as well as (2) an expected yield and a term premium. In addition, it is found that changes in the South African term premium may predict future real economic activity. Finally, the need for DSGE models to take account of financial frictions became apparent during the recent global financial crisis. As a result, the final essay incorporates a stylised banking sector into the benchmark DSGE model described above. The optimal response of the South African Reserve Bank to financial shocks is then analysed within the context of this structural model.

This dissertation consists of three essays on capital controls and exchange rate regimes. The first essay, under the background of international monetary policy trilemma, empirically investigates the validity of the proposition that holding the degree of exchange rate stability constant, a decrease in capital mobility through imposition of capital controls will enhance monetary independence. Using a panel dataset covering 88 countries for the 1995-2010 period and system GMM estimation, this paper finds that 1) capital controls help improve a country’s monetary independence; 2) the effectiveness of capital controls depends on the types of assets and the direction of flows they are imposed; 3) the choice of exchange rate regime has important impact on the effectiveness of capital controls on monetary independence. The second essay examines the role of capital controls on economic growth. Conventional wisdom suggests that allowing international capital flows improves domestic investment and growth by providing extra resources through international capital market, yet the flows can be misallocated to finance speculative or low-quality domestic investments. Using a panel dataset covering 78 countries over 1995-2009, this paper finds that 1) capital control policies promote economic growth after taking into account a country’s de facto level of capital flows; 2) controls on capital inflows helps a country’s economic growth, but not controls on outflows; 3) restrictions on different asset types affect growth differently. Capital controls on equity type flows are less effective than controls on debt type flows or direct investment. The third examines the role of exchange rate flexibility on current account balances. Global imbalances have become an important issue for economists and policy makers. Greater exchange rate flexibility is often suggested as a means to achieve faster and more efficient adjustment in the current account. However, previous empirical studies show little support for this hypothesis. This essay revisits this issue with a large panel dataset and Threshold VAR model and finds that 1) the speed of the current account adjustment is higher in a regime with greater exchange rate variability; 2) some existing popular exchange rate classifications may not capture actual exchange rate variability as well as expected.

This paper uses Federal Funds Futures and the industry returns to analyze the Federal Reserve Policy's influence on Wall Street firms. According to the results, Wall Street produces high returns in response to the monetary policy when compared to other industries. While this positive response is consistent to both interest hikes and cuts, there exists significant cross-firm and cross-period variation. Besides, the result is robust to the alternative measure of event days and employment release.

Using MSA level data, the paper shows, that geographic areas which experienced the largest housing bubble generally suffered a more serious subsequent economic downturn. More specifically, the paper establishes that MSAs with larger declines in housing permits had larger increases in unemployment. There also appears to be strong evidence of a correlation between the magnitude of a housing boom and the timing of the decline in housing permits. MSAs which experienced larger real housing inflation offered early indications of the subsequent Great Recession.

Shanghai’s residential property prices have been consistently rising for the past decade. Both the municipal and national governments have announced a series of alternately restrictive and encouraging house purchasing policies that aimed at adjusting housing prices. This paper studies all of the policies announced from January 2011 to October 2016. Using residential house price data of houses of different sizes and in different locations, this paper shows that two out of the six restrictive policy events achieved their intended negative impact on housing prices, while two out of four encouraging policy events delivered their intended positive impact. When aggregated, encouraging policies had a significant impact and restrictive policies did not.

Many regions of the world would like to replicate the financial and monetary integration of the European Monetary Union (EMU). Member countries of the Association of Southeast Asian Nations (ASEAN) have shown an interest in such an arrangement. ASEAN is a political, cultural, and economic association that includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Many of these nations are experiencing rapid economic development while others are still relatively poor and under developed. As such, they appear to be an unlikely group for currency unification. Older studies suggest that multiple currency union groupings may be possible in the short run that could be unified into a whole at an unspecified time in the future. The issue has been studied for some time and appeared defunct with the onset of the Asian Financial Crisis. More than a decade has passed and another more global financial crisis has ensued leaving many Asian countries in better shape than their highly developed trading partners in the west. This leads to the need for further examination of the possible unification of some or all ASEAN members into a Regional Currency Arrangement. This dissertation evaluates the readiness of the ASEAN nations for monetary union using data from the post Asian Financial Crisis period. Results of a formal G-PPP test show the area is an optimum currency area. Analysis of other criteria shows incredible diversity across the countries in the region that would make unification a challenge. Coordination of monetary policy would be most difficult given the variety of inflation rates and differences in depth of financial system development as explored in chapter 2. Trade has increased in the region leading to better linkages among economies but the data shows that reaching full integration of all countries by the 2020 deadline without disruptions in some economies may still be difficult.

This paper analyses the socio-economic context into which environmental policies and ecological sentiments emerge through empirically studying the relation to the environment of different kinds of capitalism. The association and interaction of the relation to the environment with other key social relations, e.g. the labour-capital relations, are studied and discussed. To achieve this, I draw from Regulation Theory and augment its analytical framework with an explicit environmental dimension. I then conduct an empirical analysis of the diversity of contemporary capitalism including the social relation to the environment for a sample of thirty-seven OECD and BRICS countries. Five kinds of capitalism are identified: the Northern-continental European, the Southern-central European, the Anglo-Saxon and Pacific, the Emerging Countries and the Two Giants. A main result is the correspondence between ecology-prone social relations to the environment, labour oriented capital-labour relations and welfare-oriented states. However, the results show that countries that are the most ecology-prone are also the ones that have the most relocated their environmental impact, an observation consistent with the critical literature on the Environmental Kuznets Curve. / Series: Ecological Economic Papers