Besides the introduction and conclusion, this thesis is comprised of six independent chapters. In this thesis we provide an in-sample and out-of-sample assessment of how the South African Reserve Bank (SARB) sets its policy rate, post 2000 inflation targeting regime, in the context of both linear and nonlinear Taylor-type rule models of monetary policy.<p. Chapter 2 provides the theoretical foundations and the case study discussion. The literature has shown that the Taylor (1993) rule has gone through many modifications since the last decade of the 20th century. The modifications of the Taylor rule include interest rate smoothing, backward and forward looking versions, and nonlinear approximations. Furthermore, there has been increasing debate on whether central banks should respond to asset prices and financial variables. Despite some disagreements, economists seem to agree on the role of the financial market in determining inflation and economic performance. As far as South Africa is concerned, a stable financial system is one of the mandates of the central bank. Chapter 3 discusses the research methods used in the thesis. First, the chapter provides an overview on the Hodrick-Prescott Filter used to detrend some series. Second, more focus is oriented on a class of estimators, used in this thesis, called Generalized Method of Moments (GMM) estimators. GMM is important in that it can be applied to several estimation contexts besides the linear model. In fact, GMM can provide a simple alternative to other estimators, especially when it is difficult to write down the maximum likelihood estimator. Chapter 4 is aimed to provide the source of data, to show the transformation made to some of them and to explore the data for preliminary results. The Augmented Dickey- Fuller (ADF), Phillips-Perron (PP), GLS transformed Dickey-Fuller (DFGLS) and Kwiatkowski, et. Al. (KPSS) tests suggest that all the series follow a stationary process. The chapter also reveals that the financial conditions index measured as an equal weight average of its components yields a smallest AIC than other alternative suggested herein. Furthermore, the chapter shows that the models that consider coincident business cycle indicator, rather than industrial production, perform better in terms of goodness of fit. Given the controversial debate on whether central banks should target asset prices for economic stability, chapter 5 investigates whether the SARB pays close attention to asset and financial markets in their policy decisions. The main findings are that the SARB policy-makers pay close attention to the financial conditions index when setting interest rate. In the same chapter, it is also found that nonlinear Taylor rule improves its performance with the advent of the financial crisis, providing the best description of insample SARB interest rate setting behaviour. The 2007-2009 financial crisis witnesses an overall increased reaction to inflation and financial conditions. In addition, the financial crisis saw a shift from output stabilisation to inflation targeting and a shift, from a symmetric policy response to financial conditions, to a more asymmetric response depending on the state of the economy. Although one could have expected that the SARB’s response of monetary policy to output during the crisis to increase, the response has dropped significantly. These results show the concern over the high level of inflation observed during the second semester of 2008.<p. In chapter 6, we test the concept of Opportunistic Approach to monetary policy. The findings support the two features of the opportunistic approach. First, we find that the models that include an intermediate target that reflects the recent history of inflation rather than a simple inflation target improve the fit of the models. Second, the data supports the view that the South African Reserve Bank (SARB) behaves with some degree of non-responsiveness when inflation is within the zone of discretion but react aggressively otherwise. Recursive estimates from the preferred model reveal that overall there has been a subdued reaction to inflation, output and financial conditions amidst the increased economic uncertainty of the 2007-2009 financial crisis. Chapter 7 compares forecast performance of linear and nonlinear monetary policy rules estimated in the two previous chapters but rewritten in their backward looking versions. Recursive forecasts values are computed for 1- to 12-step ahead for the out-of-sample period 2006:01 to 2010:12. For the nonlinear models we use bootstrap method for multi-step ahead forecasts as opposed to point forecasts approach used for linear models. The aim is to evaluate the performance of three competing models in an out of-sample forecasting exercise. Overall ranking reveals the superiority of the nonlinear model that distinguishes between downward and upward movements in the business cycles in closely matching the historical record. As such, forecasting performance tests reveal that the SARB pays particular attention to business cycles movements when setting its policy rate. / Thesis (PhD)--University of Pretoria, 2011. / Economics / unrestricted

M. Com. (Financial Economics) / The success of a monetary policy framework depends mostly on whether economic agents, especially the financial market participants, understand monetary policy decisions and are able to predict them in advance. Academics and practitioners agree that a successful Central Bank should be “boring” such that surprises about monetary policy should not arise in the announcements and the actions of the Bank, but rather in the macroeconomic developments. Thus policies that enhance clarity, transparency and communication between a Central Bank and the market can contribute to strengthening monetary policy predictability and improve the effectiveness of monetary policy itself. This dissertation assesses the predictability of the South African Reserve Bank’s (SARB) interest rate decisions since the adoption of the inflation targeting monetary policy framework in February 2000. Firstly, in order to evaluate predictability, money market forward rates are used to test whether the financial market is able to forecast the future level of policy rates, using the unbiased forward rate hypothesis. Then, using an event study methodology, changes in the money market forward rates following a monetary policy announcement are used to test whether the financial market participants were surprised by the SARB’s monetary policy decisions. The results of the unbiased forward rate hypothesis (UFRH) and the event study analysis indicate that, at least in the short term, specifically on a one-month-forward period, financial market participants have been able to predict the SARB’s monetary policy decisions with a high degree of accuracy. Moreover, the results of the event study analysis show that the South African financial market is at least semi-strong efficient, in the sense that monetary policy decisions are quickly incorporated in the market interest rates following the announcements. The event study analysis also provided some evidence that volatility in financial markets at the time of interest rate decisions has been declining over time.

South Africa's adherence to the Gold Standard while many other countries abandoned it, placed the country in a difficult position. This was exacerbated by the worldwide economic depression that resulted in the sharp decline of primary commodity prices, a decrease in demand and unemployment. The commercial banks in South Africa were obviously also affected by the prevailing circumstances and the position of one of them, Barclays Bank (Dominion, Colonial and Overseas) will be the focus of this study. One of the most important questions that will receive attention is to what extent the bank was affected by the gold standard crisis. Linked closely to this is the question of the nature of the problems encountered by the bank and the measures, if any, it took to overcome these difficulties. In this regard it will be necessary to investigate the most important areas of the imperial banks' business and the type of customers they served. Another question or issue to be investigated is the relationship between the two British banks on the one hand and the South African Reserve Bank and the government on the other. The establishment of the Reserve Bank was not openly welcomed by the imperial banks as they feared competition from the Bank while, with their considerable balances overseas, they were not convinced that there existed a need for a central bank in South Africa. In this respect, the question of co-operation between the two banks will also receive attention. / Prof. G Verhoef

Magister Commercii - MCom / Monetary policy rules are guidelines applied by policy makers when adjusting monetary instruments towards reaching policy objectives like price stability. The South African Reserve Bank (SARB) uses the repurchase (repo) rate at which it lends to commercial banks as its monetary instrument. This study examines whether the SARB considers the output gap when deciding on changes to the repo rate. In order to test the above hypothesis the study applied a simple multiple linear regression model (quantitative methods). The hypothesis was tested based on the following independent variables: consumer price index (headline), natural real interest rate, potential output and actual output using the Eviews and STAMP econometric software packages. The study focussed on the time period between 1989 and 2009 when the central bank governors were targeting the repo rate as an instrument towards achieving their monetary policy objectives. The results illustrate evidence of 82 % to 92 % correlation in the movements between the predicted Taylor rule with the univariate model and the actual repo rate. This means that the behaviour the SARB monetary policy conduct was sufficiently structured and influenced by the developments of both inflation and the output gap, even though the SARB have not consciously implemented a Taylor model. In short, the output gap and inflation rate gap pressures influenced strongly the monetary policy decisions of the SARB, even before the formal adoption of an inflation targeting framework.

This study analyses the linkage between monetary policy and the stock market in South Africa using monthly data for the period from 2000 to 2010. It provides an overview of the Johannesburg Stock Exchange and the monetary regimes adopted by the South African Reserve Bank since the 1960s and the interrelation between the monetary variables and the stock market. It also provides a review of literature, both theoretical and empirical on the linkages between the two variables. Based on the review of literature, a Vector Autoregression [VAR] model was chosen as a method of analyzing the relationship between the two variables. The empirical results revealed that there is no long term relationship between the variables, however, in the short-run there is a dynamic relationship between monetary policy and the stock market in South Africa. This implies that innovations in the stock market affect the implementation of monetary policy and vice-versa. The study recommended that monetary authorities should pay attention to the fact that the stock market performance has a great impact on their decision making due to the fact it is greatly affected by repo rates.

Magister Commercii - MCom / This study estimates the impact of the real exchange rate’s performance on economic growth in South Africa from 1990 to 2016 based on quarterly data. A review of the literature reveals that the real exchange rate can have either a positive or a negative effect on economic growth. The empirical analysis began with testing for stationarity of the variables by applying the Augmented Dickey-Fuller (ADF) and Phillips Peron (PP) tests. This was followed by the co-integration test of the model. The unit root test results show that all variables except the exchange rate were integrated at order one, that is I (1), while exchange rate volatility is integrated at order zero that is I(O). Also, the co-integration analysis indicated that variables are co-integrated. Employing the Vector Error Correction Model (VECM) technique to estimate the results, the relationship between real exchange rate and economic growth was estimated. Findings further show that in the short run, economic growth is positively responsive to the real exchange rate while in the long run, a negative relationship exists between the two variables. The results in the short run suggest that the exchange rate hurts economic growth. A 1% point increase in the real exchange rate (RER) causes a reduction in economic growth by 379 per cent. A rise in the RER affects the trade balances between exports and imports, which results in more imports in the country than exports and the devaluation of the rand stipulates imports in the short run, which leads to the gross domestic product to increase. The study recommends that the South African Reserve Bank (SARB) Monetary Committee, together with the South African government, should develop a policy that will pursue a prudent monetary policy. A stabilise real exchange rate will enhance the economic activities that will attract foreign direct investment (FDI) and create an environment conducive to investment that will boost economic growth of South Africa.

Magister Legum - LLM / The research will evaluate and discuss the importance of Deposit Insurance Systems (DIS) and the necessity of having this system. Important to the evaluation is an analytical consideration of how the South African Reserve Bank (SARB), the National Treasury (NT) and other global financial bodies proposed the approach thereof. Insofar as most jurisdictions had already adopted the DIS as encouraged by the international financial institutions, the study shall determine whether it is plausible for South Africa to derive guidance in her approach taking into account the potential risks posed by the safety-net.

This paper investigates, as its main question, the probable impact of nationalising the private shareholding of the South African Reserve Bank (SARB). A sub-question is first posed in order to answer the main question. The sub-question is: are the shareholders of the SARB the owners of the Bank and what are their rights and obligations? In a nationalisation scenario the rights and obligations of the shareholders will cease to exist. Therefore, it is essential first to determine all the rights and obligations of the shareholders when measuring the impact of nationalising the SARB private shareholding. The paper uses the A.M. Honoré legal test of ownership to determine whether the shareholders of a South African listed company and the SARB shareholders, can be viewed as the owners of the respective entities. That legal test indicated that the shareholders of a JSE- listed corporation satisfy very few of the legal incidents of ownership and the SARB shareholders satisfied none. Consequently, from a legal point of view, shareholders of the SARB are not its owners. By analysing, critically, the historic data concerning share price growth and share liquidity for the SARB, and what the possible expropriation compensation might be, this paper seeks to determine if profit is a ii motive for owning SARB shares. Profit was not found to be a motive for owning those shares. The motive of shareholders in owning SARB shares can potentially reveal undisclosed shareholder rights and obligations. The AGM of the SARB is also observed to determine if any undisclosed shareholder rights and obligations exist. No unusual rights and obligations were determined except a close relationship between the commercial bank shareholders and the SARB. The SARB shareholder rights and obligations are in accordance with the South African Reserve Bank Act and Regulations. After the sub-question is answered and a complete set of shareholder rights and obligations are determined, the operational, financial and corporate governance effect of nationalising the South African Reserve Bank is discussed. If it is assumed that the directors and Monetary Policy Committee (MPC) can continue with the same degree of autonomy, then nationalising the private shareholding of the SARB will have no significant financial, operational and corporate governance effect on the Bank. This paper suggests that the true motive for requesting the nationalisation of the SARB private shareholding, is the desire to nationalise the ability of commercial banks to create the nation’s money supply.

Thesis (MBA)--Stellenbosch University, 2006. / ENGLISH ABSTRACT: The National Payment System is currently dominated by uncompetitive banks and there is growing resistance by the South African public over the current fees being charged. The legislature is proposing a new Bill which aims at creating a new category of banks, namely Dedicated Banks. These Dedicated Banks will have lower capital requirements, thus making it more attractive to establish a Dedicated Bank. The aim of the Dedicated Banks Bill is to bring banking services to the masses. The Dedicated Banks may provide banking services to consumers at much more competitive fees. The aim of this study is to determine whether Dedicated Banks will be allowed to participate in the National Payment System as clearing and settlement banks. A detailed review is conducted of the current National Payment System, the framework in which it operates and incentives currently underway to guide the modernisation of the National Payment System. A critical analysis of the legal framework of the National Payment System in conjunction with the Dedicated Banks Bill is undertaken to determine whether there is any legislative scope for allowing Dedicated Banks to participate in the National Payment System. An assessment of the competitive environment of the National Payment System is given to determine whether regulators may consider allowing Dedicated Banks their participation as clearing and settlement banks. The arguments presented are confirmed by the Reserve Bank's 2010 vision for the National Payment System which confirms the conclusions reached that Dedicated Banks may indeed participate in the National Payment System as clearing and settlement banks. The risk which participants may introduce into the National Payment System is investigated in order to determine whether this may pose as an additional barrier to Dedicated Banks' participation as clearing and settlement banks. / AFRIKAANSE OPSOMMING: Die Nasionale Betalingstelsel word huidiglik gedomineer deur onmededingende banke en daar is groeiende weerstand deur die Suid-Afrikaanse publiek oor die huidige fooie wat gevra word. Die wetgewer het 'n nuwe konsep wet voorlê wat daarop gemik is om 'n nuwe kategorie van banke daar te stel, naamlik Toegewyde Banke. Hierdie Toegewyde Banke sal laer kapitaal vereistes he, wat dit aantrekliker sal maak om 'n Toegewyde Bank op die been te bring. Die doel van die konsep wet is om bankdienste aan die massas te bring. Die Toegewyde Banke mag moontlik bankdienste aan kliente bied teen meer mededingende fooie. Die doel van hierdie studie is om vas te stel of Toegewyde Banke toegelaat gaan word om deel te neem aan die Nasionale Betalinstelsel as verrekeningsbanke. 'n Omvattende ondersoek word onderneem van die huidige Nasionale Betalingstelsel, die raamwerk waarbinne dit werksaam is en huidige pogings wat onderweg is vir die modernisering van die Nasionale Betalingstelsel. 'n Kritiese analiese van die regsraamwerk saam met die konsep wet word vervat om sodoende vas te stel of daar enige wetlike weg is om Toegewyde Banke toe te laat om deel te neem aan die Nasionale Betalingstelsel. 'n Vasstelling van die mededingende omgewing van die Nasionale Betalingstelsel word weergegee om vas te stel of die regulatoriese instansies dit mag oorweeg om Toegewyde Banke toegang te verleen as verrekeningsbanke. Die argumente wat voorgele word, word ondersteun deur die Reserwebank se 2010 visie vir die Nasionale Betalingstelsel wat die konklusies wat gemaak word ondersteun, naamlik dat Toegewyde Banke wel mag deelneem aan die Nasionale Betalingstelsel as verrekeningsbanke. Die risiko wat deelnemers aan die Nasionale Betalingstesel mag bring word ondersoek om sodoende vas te stel of dit enige verdere hindernis vir Toegewyde Banke se deelname as verrekeningsbanke mag bring.

Dissertation (LLM)--University of Pretoria, 2014. / gm2015 / Centre for Human Rights / LLM / Unrestricted