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.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/51575 |
| Date | January 2000 |
| Creators | Bauknecht, Klaus Dieter |
| Contributors | Smit, B.W., Stellenbosch University. Faculty of Economic & Management Sciences . Dept. of Economics . |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | 350 leaves : ill. |
| Rights | Stellenbosch University |
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