Wits Business School (ETDs)

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Subject: search.filters.subject.Monetary Policy

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    Inflation Targeting and Unemployment in the South African Retail Sector
    (University of the Witwatersrand, Johannesburg, 2024) Mutwanamba, Pfarelo Victor; Mwebi, Jane
    This study investigates the impact of inflation targeting on employment in the South Africanretail sector, addressing concerns from trade unions and stakeholders regarding the nation'smonetary policy framework. Spanning from 2000 to 2022, coinciding with the adoption ofinflation targeting by the South African Reserve Bank (SARB) in year 2000, the researchutilises econometric methods and secondary data to fill gaps in the literature, notably the lackof dedicated research on the retail sector and the mechanisms through which inflationtargeting influences retail sector employment. Amidst persistent developmental challenges,including a 32.7% unemployment rate in Q4 2022, heightened poverty and inequality (i.e.,South Africa has the highest Gini Coeffient1 in the world), and sluggish economic growth, thestudy uncovers nuanced insights. While inflation targeting measures contribute to pricestability, they do not directly address the underlying structural issues contributing to elevatedunemployment rates. This aligns with the formulated hypotheses that (H1) the implementationof SARB's inflation targeting framework has a significant impact on employment in SouthAfrica's retail industry, and (H2) the approach adopted by the SARB in implementing itsinflation targeting policy influences the extent of its impact on employment in South Africa'sretail industry – implying that the null hypothesis (H0) is rejected in favour of alternativehypotheses. The study's conclusion, substantiated by Johansen Cointegration, GrangerCausality, and Impulse Functions analyses, affirms the substantial impact of SARB's inflationtargeting framework on retail sector employment. The Johansen Cointegration analysisestablishes a stable, statistically significant long-term relationship between interest rates andretail employment, corroborating the hypotheses. Furthermore, the study highlights thenecessity for targeted policy interventions, such as enhanced skills training programs andsupport for small and medium-sized enterprises (SMEs). Additionally, it emphasises theimportance of tailored responses to effectively address unemployment and promotesustainable economic development in South Africa. Notably, the study suggests an expandedrole for SARB beyond its mandate of price stability, endorsing proactive measures to tacklethe structural issues contributing to unemployment in the retail sector
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    The impact of monetary policy announcements by the South African Reserve Bank on stock market returns using forward rate agreements
    (2021) Mabasa, Nhlamulo Collins
    The objective of this paper is to explore the unanticipated impact of monetary policy announcements on stock market returns using Forward Rate Agreements (FRAs).This paper looks at the Johannesburg Stock Exchange (JSE) All Share Index and two other sectoral specific stock market indices (Financial and Industrial sector indices) and assess the responsiveness of these stock market returns to unanticipated monetary policy announcement shock. In an attempt to understand this relationship between monetary policy and the stock market, the main empirical view suggests that decomposing monetary policy changes into anticipated and unanticipated components is crucial for discerning their effects. The decomposition of unexpected policy rates is based on the futures market. In the absence of the South African interest rate futures market, this study employs a FRA which serves as a measure of monetary policy surprise. This study begins with a 1-dayevent study, which examines the immediate impact of monetary policy shocks on the stock market, and then use an Ordinary Least Squares (OLS) regression analysis, which provides insight to into the dynamic effects of the unanticipated interest rate shock on the stock market. This study employs a time series percentage change daily closing prices of the South African stock market (JSE all share Index, sub-indices), actual changes in the South African Reserve Bank (SARB) repo rate, and the FRA, spanning the period January 2010 through to December 2019, which explores the post-global recession dynamics. The study shows that a hypothetical unanticipated increase of 1% repo rate results in a decline of 0.32 percentage of the Johannesburg Stock Exchange ALL SHARE Index. The findings and recommendations are crucial for the South African central bank authorities and stock market participants as it explains the process through which monetary policy outcomes are transmitted to the real economy, inflation and employment. A future piece of work could contemporarily assess the impact of monetary policy and other sector related and political events on the stock market