Faculty of Commerce, Law and Management (ETDs)
Permanent URI for this communityhttps://hdl.handle.net/10539/37778
Browse
4 results
Search Results
Item An investigation of the causes of South Africa’s rising inflation from 2007– 2023(University of the Witwatersrand, Johannesburg, 2024) Ndou, Phumudzo FarananiThe paper investigates the causes of South Africa’s inflation from 2007-2023. Thereport finds that labour costs, import prices and the exchanges rate are positivedeterminants of inflation. The report finds that labour unit cost is still the biggestcontributor to inflation. The report futher finds that inflation targeting must beemployed together with non-monetary policy measures to be fully effective. The reportrecommends fiscal policy measures such govement price control and policy measures tocontrol wage increases. The report futher recommends that the SARB must be moretransparent in communicating its measures on how it will deal with inflation in thefuture this will enable the Reserve Bank to better control inflation expectationsItem Essays on Inflation Targeting and Macroeconomic Performance(University of the Witwatersrand, Johannesburg, 2024) Buthelezi, Norbert Sfiso; Malikane, ChristopherThis thesis focuses and investigates the impact of inflation targeting on macroeconomic performance, whether the level of the inflation target is consistent with optimal economic performance and finally, we investigate whether inflation targeting affects the behaviour of fiscal policy in such a way as to deliver fiscal sustainability. This is important because many central banks have adopted inflation targeting as their monetary policy framework. In chapter 2, we investigate the effect of inflation targeting on macroeconomic performance. We do so by formulating a measure of IT that is closely related to the degree of monetary policy activism that is used in the literature. Applying this to advanced and emerging market economies, we find that IT has an ambiguous effect on economic growth in advanced economies and it has negative effect in emerging markets. We also find mixed results on the effect of IT on inflation performance. Lastly, we find that IT tends to lower bond yields across economies. We argue that the financial market benefits of IT do not find expression in real economic activity because of the disconnect that may exist between financial markets and real economic activity. In chapter 3 we argue that there exists a non-linear relationship between inflation one hand and economic growth and unemployment rates on the other. IT requires an explicit announcement of a numerical target for inflation. However, it is not clear whether the announced targets are consistent with maximum economic growth and minimum unemployment rates. We derive a simple growth model in which economic growth and the unemployment rate are nonlinearly related to the inflation rate. Our findings are that there are some advanced economies that sacrifice growth to maintain low inflation rates. This sacrifice is more prevalent in emerging markets, and it ranges from 0.5 percentage points to 3 percentage points. The same results hold for the unemployment rate, excess unemployment rate to maintain the low inflation targets ranges from 0.5 to 4.5 percentage points. We argue that policymakers should consider ways to align inflation targets to optimal levels in order to include more people into employment. In chapter 4 we investigate whether the implementation of fiscal policy is consistent with the monetary policy stance. A number of economies have adopted inflation targeting as an overall framework to guide monetary policy. However, a key requirement of this framework is that fiscal policy should not be implemented in a manner that is not consistent with inflation targeting. We investigate the behaviour of fiscal authorities under inflation targeting by estimating simple fiscal rules that incorporate the targets of monetary policy as normally specified in simple Taylor rules. Our results suggest that for many of the economies in our sample, fiscal authorities respond in a counter-cyclical manner. In advanced economies they do not restrain fiscal policy when inflation rises. This is in contrast to fiscal authorities in emerging markets. Lastly, we do not find uniform adherence to Bohn’s principle of fiscal sustainability across economiesItem The effect of exchange rate and inflation on the stock market returns of the top mining companies in South Africa(University of the Witwatersrand, Johannesburg, 2022) Mangere, Murehwa; Malikane, ChristopherThis research study examines the impact of nominal Rand/USD exchange rate and inflation on the nominal stock returns of top mining companies in South Africa that are listed on the Johannesburg Stock Exchange (JSE). The selected mining companies for this study formpart of the FTSE/JSE Precious Metals and Mining Index. The relevant data was collected from Bloomberg over a ten-year period (2010 to 2020). The Johansen cointegration analysis was applied to model the long run relationship between inflation, exchange rate and stock market prices for JSE Precious Metals and Mining Index. The study outcome revealed that, in the long run, there is a negative and significant relationship between inflation and the stock market returns. Exchange rate has a negative, though insignificant, impact on the stock market returns for FTSE/JSE Precious Metals and Mining Index in the long run. The outcomes of this study pose important implications, from both a policy and practical perspective. Based on the findings, it is recommended that from a policy perspective, the inflation policy must minimise and stabilise inflation fluctuations. This will result in investor confidence and more investments can be made to revitalise the precious metals mining sector. Furthermore, the findings suggest that exchange rate should be considered at valuation to hedge against currency risk and diversify investmentsItem The direct and indirect effect of interest rates on economic growth in Botswana(2021) Masole, MbakoThe study determines the direct and indirect effects of interest rates on economic growth through domestic investment, real exchange rate, inflation, foreign direct investment (FDI), trade openness and human capital. The results of this study will guide the appropriate intervention in the use of interest rates in stimulating economic growth. The study uses a quantitative method with multiple regression analysis. It examines the effects of interest rates on economic growth and domestic investment, FDI, inflation, real effective exchange rate and trade openness from 2004 to 2019 in Botswana. The study is highly reliant on secondary data, and quarterly data is used to run the regressions. The results show that the real interest rate in Botswana has a negative effect on domestic investment and inflation, with domestic investment being statistically significant and inflation not statistically significant. However, it has a positive effect on real exchange rate, FDI and trade openness. FDI and real exchange rate is statistically significant whereas trade openness is stastically insignificant. Real exchange rate and trade openness have a positive effect on economic growth, while domestic investment, inflation, real interest rate and FDI have a negative effect on economic growth. Domestic investment is statistically significant, while real exchange rate, inflation, FDI and trade openness are statistically insignificant. On the path analysis, exchange rate, inflation, FDI and trade openness cannot mediate the effect of interest rates on economic growth, whereas domestic investment mediates the effect of interest rate on economic growth. The study concludes that it is critical for policy makers, when making policy decisions on the monetary policy, to bear in mind the influence of interest rate on other macro-economic factors, and how these subsquently affect economic growth. The use of interest rate did not yield the desired results in Botswana, it is therefore rather recommended to consider the use of fiscal policy to stimulate economic growth.