Dissertations / Theses on the topic 'Interest rates – Australia – Econometric models'

This dissertation contains a series of essays that provide empirical evidence for Australia on some fundamental predictions of real business cycle models and on the convergence and persistence of real interest rates. Chapter 1 provides a brief introduction to the issues examined in each chapter and provides an overview of the methodologies that are used. Tests of various basic predictions of standard real business cycle models for Australia are presented in Chapters 2, 3 and 4. Chapter 2 considers the question of great ratios for Australia. These are ratios of macroeconomic variables that are predicted by standard models to be stationary in the steady state. Using time series econometric techniques (unit root tests and cointegration tests) Australia great ratios are examined. In Chapter 3 a more restrictive implication of real business cycle models than the existence of great ratios is considered. Following the methodology proposed by Canova, Finn and Pagan (1994) the equilibrium decision rules for some standard real business cycle are tested on Australian data. The final essay on this topic is presented in Chapter 4. In this chapter a large-country, small-country is used to try and understand the reason for the sharp rise in Australia??s share of world output that began around 1990. Chapter 5 discusses real interest rate linkages in the Pacific Basin region. Vector autoregressive models and bootstrap methods are adopted to study financial linkages between East Asian markets, Japan and US. Given the apparent non-stationarity of real interest rates a related issue is examined in Chapter 6, viz. the persistence of international real interest rates and estimation of their half-life. Half-life is selected as a means of measuring persistence of real rates. Bootstrap methods are employed to overcome small sample issues in the estimation and a non-standard statistical inference methodology (Highest Density Regions) is adopted. Chapter 7 reapplies the High Density Regions methodology and bootstrap half-life estimation to the data used in Chapters 2 and 5. This provides a robustness check on the results of standard unit root tests that were applied to the data in those chapters. Main findings of the thesis are as follows. The long run implications of real business cycle models are largely rejected by the Australia data. This finding holds for both the existence of great ratios and when the explicit decision rules are employed. When the small open economy features of the Australian economy are incorporated in a two country RBC model, a country-specific productivity boom seems to provide a possible explanation for the rise in Australia??s share of world output. The essays that examine real interest rates suggest the following results. Following the East Asian financial crisis in 1997-98 there appears to have been a decline in the importance of Japan in influencing developments in the Pacific Basin region. In addition there is evidence that following the crisis Korea??s financial market became less insular and more integrated with the US. Finally results obtained from the half-life estimators suggest that despite the usual findings from unit root tests, real interest rates may in fact exhibit mean-reversion.

The term structure of interest rates shows the relationship between yields of zero-coupon bonds and their maturities. The empirical performance of the single-factor model of the affine term structure models, such as Vasicek (1977) and Cox, Ingersoll, and Ross (1985), has not been entirely satisfactory. The curve fitting methods, and particularly the spline method, used in practice to estimate the term structure are ad hoc and thus subject to arbitrage opportunities. Guo (1998) used the fundamental Partial Differential Equation (PDE) for bond pricing to derive a linear discount function, which is consistent with no-arbitrage. He showed that this is the unique linear solution to the PDE. This solution, the exponential-polynomial model or EP model for short, has n unobserved state factors that drive a stochastic discount process for pricing bonds so as to rule out arbitrage opportunities. In this thesis, we conduct an extensive cross-sectional analysis of the EP model on two different data sets: prices for daily Treasury bills, notes and bonds from the New York Federal Reserve Bank quotation sheets from July 1989 to October 1996, and daily Canadian bills, notes and bonds prices for the time period from June 1992 to May 1995. We estimate the model by applying a minimization criterion. The cross-sectional analysis shows that the EP model is able to describe adequately the term structure of interest rates. For the US data, we find that every term structure from the sampling period can be fully represented by either nine or ten state factors. Eigenvalue analysis indicates that the first three principal components are underlying the term structure movements. We conduct a time series analysis on the three principal components. They are found to be best described by ARMA/GARCH processes. We form two types of GARCH forecasts of the three principal components and test their out-of-sample performance. We conclude that the three principal components are predictable in a statis

This thesis consists of two related parts. In the first part we conduct an empirical examination of the dynamics of Australian interest rates of six different maturities, covering the whole yield curve. This direct study of the long rates is quite novel. We use maximum likelihood estimation on a variety of models and find some results that are in stark contrast to previous studies. We estimate Poisson-jump diffusion (PJD) models and find very strong evidence for the existence of jumps in all daily interest rate series. We find that the PJD model fits short-rate data significantly better than a Bernoulli-jump diffusion model. We also estimate the CKLS model for our data and find that the only model not rejected for all six maturities is the CEV model in stark contrast to previous findings. Also, we find that the elasticity of variance estimate in the CKLS model is much higher for the short-rates than for the longer rates where the estimate is only about 0.25, indicating that different dynamics seem to be at work for different maturities. We also found that adding jumps to the simple diffusion model gives a larger improvement than comes from going from the simple diffusion to the CKLS model. In the second part of the thesis we examine the Flesaker and Hughston (FH) term structure model. We derive the dynamics of the short rate under both the original measure and the risk-neutral measure, and show that some criticisms of the bounds for the short rate may not be significant in actual applications. We also derive the dynamics of bond prices in the FH model and compare them to the HJM model. We also extend the FH model by allowing the martingale to follow a jump-diffusion process, rather than just a diffusion process. We derive the unique change of measure that guarantees the family of bond prices is arbitrage-free. We derive prices for caps and swaptions, and extend the results to include Bermudan swaptions and show how to price options with the jump-diffusion version of the FH model.

This thesis models the Australian-US Dollar (AUD/USD) exchange rate with particular attention being paid to investor risk aversion. Accounting for investor risk aversion in AUD/USD exchange rate modelling is novel, so too is the method used to measure risk aversion in this thesis. Investor risk aversion is measured using a technique developed in Bliss and Panigirtzoglou (2004), which makes use of Probability Density Functions (PDFs) extracted from option markets. More conventional approaches use forward-market pricing or Uncovered Interest Parity. Several methods of estimating PDFs from option and spot markets are examined, with the estimations from currency spot-markets representing an original application of an arbitrage technique developed in Stutzer (1996) to the AUD/USD exchange rate. The option and spot-market PDFs are compared using their first four moments and if estimated judiciously, the spot-market PDFs are found to have similar shapes to the option-market PDFs. So in the absence of an AUD/USD exchange rate options market, spot-market PDFs can act as a reasonable substitute for option-market PDFs for the purpose of examining market sentiment. The Relative Risk Aversion (RRA) attached to the AUD/USD, the US Dollar-Japanese Yen, the US Dollar-Swiss Franc and the US-Canadian Dollar exchange rates is measured using the Bliss and Panigirtzoglou (2004) technique. Amongst these exchange rates, only the AUD/USD exchange rate demonstrates a significant level of investor RRA and only over a weekly forecast horizon. The Bliss and Panigirtzoglou (2004) technique is also used to approximate a time-varying risk premium for the AUD/USD exchange rate. This risk premium is added to the cointegrating vectors of fixed-price and asset monetary models of the AUD/USD exchange rate. An index of Australia???s export commodity prices is also added. The out-of-sample forecasting ability of these cointegrating vectors is tested relative to a random walk using an error-correction framework. While adding the time-varying risk premium improves this forecasting ability, adding export commodity prices does so by more. Further, including both the time-varying risk premium and export commodity prices in the cointegrating vectors reduces their forecasting ability. So the time-varying risk premium is important for AUD/USD exchange rate modelling, but not as important as export commodity prices.

The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre-repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long-run and short-run and tests the symmetric and asymmetric interest rate pass-through using the Scholnick (1996) ECM and the Wang and Lee (2009) ECM-EGARCH (1, 1)-M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass-through is found in the short-run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM-EGARCH (1, 1), negative volatility impact and leverage effect are present and influential only in the deposit interest rate adjustment process in South Africa.

One of the most important aspects of monetary policy is an understanding of the transmission process: the mechanism through which the monetary policy actions of the Central Bank impact on aggregate demand and prices by influencing the investment and consumption decisions of households and firms. Thus, commercial banks are regarded as conveyers of monetary policy shocks and are expected to adjust retail interest rates in response to policy shocks one-to-one. In practice, commercial banks adjust their retail rates in response to changes in monetary policy with a lag of several months and this delay is often viewed as an impediment on the ability of the Central Bank to steer the economy. Several reasons, such as credit rationing and adverse selection, switching costs, risk sharing, consumer irrationality, structure of the financial system, menu costs and asymmetric information are some of the causes advanced for commercial banks retail rates being sticky. In spite of the important role of pass-through analysis in the monetary policy transmission process, it has received very little attention in Sub-Saharan Africa, especially in Cameroon and Nigeria, which have implemented a series of reforms. To this end, this study gives a comparative analysis of interest rate pass-through in Nigeria and Cameroon using retail rates (lending and deposit) and a discount rate (policy rate) from January 1990 to December 2010 for Nigeria and from January 1990 to June 2008 for Cameroon. The study examines the magnitude and speed of retail rate adjustments to changes in the Central Bank policy rate as well as examining the possibility of symmetric and asymmetric pass-through in both countries. In addition, the study also investigates whether there is pass-through of monetary policy from one country to the other. The empirical analysis employs four different types of co-integration techniques to test the presence of a long run co-integrating relationship between retail and the policy rates in order to ensure that the relationship detected is robust. Three sets of analyses are carried out in the study. Following Cottarelli and Kourelis (1994), the study employed a co-integration technique, firstly, to analyse pass-through for the entire sample, secondly, to analyse symmetric and asymmetric pass-through using a ten year rolling window analysis in an error correction framework. Finally, the policy rates were swapped around to investigate if there are transmissions of impulses from one country to the other. Overall, evidence from the entire sample and rolling window analysis suggests that monetary policy in Cameroon is less effective. This is perhaps one of the reasons why the Banque Des Etats De L’Afrique Centrale (BEAC) is unable to sterilise the excess liquidity of the banking sector in Cameroon. The long run pass-through of 0.72 and 0.71 for the entire sample, and the average long run pass-through for the rolling window of 0.78 and 0.76 for the lending and deposit rates, suggest that monetary policy is highly effective in Nigeria compared to Cameroon. The empirical evidence confirmed asymmetric adjustment in six rolling windows in the lending rate in Nigeria. Three rolling windows indicated that the direction of rigidity is downward, supporting Scholnick’s (1996) collusive pricing arrangement between banks, and the other three suggested that the lending rate is rigid in the upward direction, corroborating Scholnick’s (1996) customer reaction hypothesis. The deposit rate in Cameroon was also found to adjust asymmetrically and the direction of rigidity is downward, supporting Hannan and Berger’s (1991) customer reaction hypothesis. The investigation of impulse transmission between the two countries revealed that only the policy rate in Nigeria exerts some influence on the deposit rate in Cameroon. Policy recommendations are also discussed.

The successful launch of the European Monetary Union (EMU) raised an already ever growing interest in the economics of monetary integration and the formation of monetary unions around the world. Following the EMU experience, countries have considered forming a monetary union amongst themselves. The East African Community (EAC), comprising the three original member countries Kenya, Tanzania and Uganda and now including Burundi and Rwanda, is an example of such a group of countries that seek to form a monetary union. This study aims to identify the current level of financial integration amongst the East African countries. In order to do so the study examines whether the pass-through of monetary policy in the five countries has become similar over time. This is to provide an indication of the extent to which the nominal convergence criteria amongst the member countries have been met. The results of the study provide an indication of whether the formation of a monetary union in East Africa is possible. The empirical analysis used in this study included stationarity tests, four tests of co integration and an asymmetric error correction model to investigate whether the pass-through of monetary policy transmission in the five countries has become more similar over the ten year sample period from 1999 to 2008. The analysis uses three interest rates and 6-year rolling windows to identify the extent of macroeconomic convergence that prevails within the EAC, and consequently whether the formation of a monetary union is possible. The results suggest that the magnitude of the convergence amongst the countries remain low and there are significant rigidities in the deposit and lending rates over time, however the passthrough has improved with respect to the lending rate but not the deposit rate. The overall conclusion of the study suggests that an EAC wide monetary union is currently not possible based on the evidence provided from the pass-through analysis.

This study analyses and investigates the impact of crude oil price vitality on unemployment in South Africa. This is done by firstly surveying theoretical and empirical literature on the crude oil price-unemployment relationship before relating it to South Africa. Secondly, crude oil and unemployment trends with their causes are overviewed. The study employs a Johansen co-integration technique based on VAR to model unemployment against crude oil prices, real effective exchange rate, real interest rates and real gross domestic product. Using quarterly data for the period 1990-2010, econometric results show that crude oil prices are positively related to unemployment in the long run while the opposite is true in the short run. Parameter estimates and variables are statistically significant; hence there are also policy recommendations which are related to both empirical and theoretical literature. Lastly, impulse response functions show that unemployment returns to equilibrium in the long run when crude oil price changes whereas real interest rates followed by crude oil prices explain most of unemployment changes compared to other variables in the long run.

Tam Chak Yue, Ben.
Thesis (M.Phil.)--Chinese University of Hong Kong, 1997.
Includes bibliographical references (leaves 49-51).
Chapter 1. --- Introduction --- p.3
Chapter 2. --- Money and Growth in the neoclassical production function --- p.7
Chapter 2.1 --- The Real Competitive Equilibrium --- p.8
Chapter 2.2 --- The Monetary Competitive Equilibrium with the Cash-in-Advance approach --- p.11
Chapter 2.3 --- Alternative Approach: Money-in-Utility-Function --- p.16
Chapter 2.4 --- Alternative Approach: Transaction Cost --- p.20
Chapter 3. --- Three Approaches with Endogenous Leisure --- p.25
Chapter 3.1 --- The Real Competitive Equilibrium --- p.26
Chapter 3.2 --- The Alternative Approaches to Interest Rate Smoothing --- p.28
Chapter 3.2.1 --- The Cash-in-Advance Approach --- p.28
Chapter 3.2.2 --- The Money-in-Utility-Function Approach --- p.29
Chapter 3.2.3 --- The Transaction Cost Approach --- p.30
Chapter 4. --- Money and Growth in an Economy with Endogenous Growth --- p.35
Chapter 4.1 --- The Real Competitive Equilibrium of Ak Model --- p.36
Chapter 4.2 --- The Alternative Approaches --- p.37
Chapter 4.2.1 --- The Cash-in-Advance Approach --- p.37
Chapter 4.2.2 --- The Money-in-Utility-Function Approach --- p.39
Chapter 4.2.3 --- The Transaction Cost Approach --- p.40
Chapter 5. --- Concluding Remark --- p.44
Appendix --- p.46
Chapter A1. --- The First Order Condition of The MIUF Approach with Endogenous Leisure --- p.46
Chapter A2. --- The First Order Condition of The TC Approach with Endogenous Leisure --- p.46
Chapter A3. --- The Transitional Dynamics of Ak Model with The money-in-utility-function Approach --- p.47
Literature Cited --- p.50

Sun, Wu.
Thesis (M.Phil.)--Chinese University of Hong Kong, 2008.
Includes bibliographical references (leaves 43-45).
Abstracts in English and Chinese.
Abstract --- p.I
摘要 --- p.II
Acknowledgments --- p.III
Chapter Essay 1. --- The Effect of Impatience on Determinacy --- p.1
Chapter 1.1 --- Introduction --- p.1
Chapter 1.2 --- The model --- p.2
Chapter 1.3 --- Conclusion --- p.8
Chapter Essay 2. --- Determinacy under Non-separable Utility --- p.9
Chapter 2.1 --- Introduction --- p.9
Chapter 2.2 --- The basic model --- p.10
Chapter 2.3 --- Conclusion --- p.21
Chapter Essay 3. --- Determinacy under Calvo-Style Sticky Price Model --- p.23
Chapter 3.1 --- Introduction --- p.23
Chapter 3.2 --- The model --- p.24
Chapter 3.2.1 --- With staggered price only --- p.24
Chapter 3.2.2 --- Incorporating firm-specific capital --- p.30
Chapter 3.2.3 --- Incorporating staggered wages --- p.35
Chapter 3.3 --- Conclusion --- p.41
Reference --- p.43
Appendix --- p.46
Table 1: Baseline Calibration --- p.46
Table 2: Baseline Calibration --- p.46

Lin Haizhen.
Thesis (M.Phil.)--Chinese University of Hong Kong, 2003.
Includes bibliographical references (leaves 58-61).
Abstracts in English and Chinese.
Chapter I. --- Essay One --- p.1
Chapter 1 --- Introduction --- p.2
Chapter 2 --- A CIA Model with Endogenous Investment --- p.5
Chapter 2.1 --- The Economic Environment --- p.5
Chapter 2.2 --- Equilibrium Dynamics --- p.9
Chapter 3 --- An Extended Model with Stockman CIA Constraint --- p.16
Chapter 3.1 --- The Economic Environment --- p.17
Chapter 3.2 --- Equilibrium Dynamics --- p.19
Chapter 4 --- Conclusion --- p.22
Chapter II. --- Essay Two --- p.25
Chapter 1 --- Introduction --- p.26
Chapter 2 --- A MIUF Model with Non-Separable Leisure --- p.28
Chapter 2.1 --- The Economic Environment --- p.28
Chapter 2.2 --- Equilibrium and Local Dynamics --- p.31
Chapter 3 --- Conclusion --- p.36
Chapter III. --- Essay Three --- p.38
Chapter 1 --- Introduction --- p.39
Chapter 2 --- Productive Money and Investment in a Sticky Price Model --- p.41
Chapter 2.1 --- The Economic Environment --- p.41
Chapter 2.2 --- Equilibrium Dynamics --- p.45
Chapter 3 --- Endogenous Labor Supply --- p.50
Chapter 4 --- Conclusion --- p.56
Chapter IV. --- References --- p.58

Ye, Guofeng.
"September 2010."
Thesis (M.Phil.)--Chinese University of Hong Kong, 2010.
Includes bibliographical references (leaves 33-34).
Abstracts in English and Chinese.
ABSTRACT --- p.1
摘要 --- p.2
Chapter 1 --- INTRODUCTION --- p.5
Chapter 2 --- LITERATURE REVIEW ON MONETARY TRANSMISSION MECHANISM …… --- p.8
Chapter 3 --- THE EFFECT OF SHORT-TERM INTEREST RATE ON THE ECONOMY …… --- p.13
Chapter 4 --- METHODOLOGY --- p.16
Chapter 4.1 --- The Structural Vector Autoregressive Model --- p.16
Chapter 4.2 --- The Error Correction Model --- p.18
Chapter 4.3 --- The Alternative Model --- p.19
Chapter 5 --- DATA --- p.20
Chapter 5.1 --- Data Description --- p.20
Chapter 5.2 --- Data Source --- p.20
Chapter 6 --- EMPIRICAL RESULTS --- p.21
Chapter 6.1 --- The Structural Vector Autoregressive Model --- p.21
Chapter 6.2 --- The Error Correction Model --- p.28
Chapter 6.3 --- The Alternative Model --- p.30
REFERENCES --- p.33
APPENDIX --- p.35
Table 1 --- p.35
Table 2 (SVAR: 1-3 years) --- p.36
Table 3 (SVAR: 3-5 years) --- p.37
Table 4 (SVAR: 5-7 years) --- p.38
Table 5 --- p.39
Table 6 (Error Correction Model: 1-3 years) --- p.40
Table 7 (Error Correction Model: 3-5 years) --- p.41
Table 8 (Error Correction Model: 5-7 years) --- p.42
Table 9 --- p.43
Table 10 (Money Supply: M0) --- p.44
Table 11 (Money Supply: M 1) --- p.46
Table 12 (Money Supply: M2) --- p.48

Wang Chongying.
Thesis (M.Phil.)--Chinese University of Hong Kong, 2004.
Includes bibliographical references (leaves 66-69).
Abstracts in English and Chinese.
Chapter I. --- Endogenous Time Preference and Non-neutrality of Money --- p.1
Chapter 1 --- Introduction --- p.2
Chapter 2 --- The Model --- p.5
Chapter 3 --- Non-neutrality of Money --- p.9
Chapter 4 --- Equilibrium Dynamics --- p.13
Chapter 5 --- Conclusion --- p.16
Chapter II. --- Endogenous Time Preference and Interest Rate Feedback Rules --- p.18
Chapter 1 --- Introduction --- p.19
Chapter 2 --- Endowment Economy --- p.21
Chapter 2.1 --- The Model --- p.21
Chapter 2.2 --- Equilibrium Dynamics --- p.25
Chapter 3 --- Extended Model with Capital --- p.28
Chapter 3.1 --- The Model --- p.28
Chapter 3.2 --- Equilibrium Dynamics --- p.32
Chapter 4 --- Conclusion --- p.34
Chapter III. --- Interest Rate Rules and Indeterminacy in a Discrete-Time Monetary Model --- p.37
Chapter 1 --- Introduction --- p.38
Chapter 2 --- The Model --- p.39
Chapter 3 --- Equilibrium Dynamics --- p.42
Chapter 4 --- Conclusion --- p.45
Chapter IV. --- Backward-Looking Interest Rate Feedback Rules --- p.48
Chapter 1 --- Introduction --- p.49
Chapter 2 --- The Model --- p.51
Chapter 3 --- Equilibrium Dynamics --- p.57
Chapter 4 --- Conclusion --- p.61
Chapter V. --- Appendix --- p.63
Chapter VI. --- References --- p.66

Thesis (Ph. D.)--Florida State University, 2005.
Advisor: Dr. Stefan Norrbin, Florida State University, College of Social Sciences, Dept. of Economics. Title and description from dissertation home page (viewed Sept. 21, 2005). Document formatted into pages; contains xii,163 pages. Includes bibliographical references.

Thesis submitted in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School at the University of the Witwatersrand February 2017
For developed economies, it has been shown that the slope of the yield curve is a good indicator of the future path of real output and inflation. This paper investigates the predictive abilities of the yield curve slope for domestic growth and inflation in emerging market economies. Given the sovereign risk premia in these economies, it also assesses whether adding the sovereign risk spread to the yield curve spread improves the predictive content of the yield curve. It finds that the yield curve can predict real output at both the short and long forecasting horizons in emerging economies, the extent of which differs across countries. It also finds that the predictive performance for inflation is weaker than that of output growth, especially in the shorter forecasting horizons, and that the sovereign risk spread has additional predictive content for growth and inflation. This suggests that market participants and monetary policy makers in these economies should supplement their forecasting models with information contained in the yield curve to forecast domestic growth and inflation.
MT2017

This dissertation explores different aspects of the interaction between money and asset prices. The first chapter investigates how a firm’s financing affects its decision to update prices: does linking interest rates to inflation alter the firm’s optimal price updating strategy? Building on the state dependent pricing models of Willis (2000) and the price indexing literature of Azariadis and Cooper (1985) and Freeman and Tabellini (1998), this model investigates the financing and price updating decisions of a representative firm facing state-dependent pricing and a cash-in-advance constraint. The model shows the circumstances under which a firm’s financing decision affects its price updating decision, and how the likelihood of changing prices affects the amount borrowed. It also illustrates how the use of nominal (as opposed to inflation-linked) interest rates leads to a lower frequency of price updating and higher profits overall for a firm facing menu costs and sticky prices. The second chapter extends the bank run literature to present a theoretical mechanism that explains how money supply can affect asset prices and asset price volatility. In a two period asset allocation model, agents faced with uncertainty cannot perfectly allocate assets ex-ante. After income shocks are revealed, they will be willing to pay a premium over the future fundamental value for an asset in order to consume in the current period. The size of this premium is directly affected by the supply of money relative to the asset. This paper explores the relationship between economy-wide monetary liquidity on the mean and variance of equity returns and in relation to market liquidity. At an index level, I test the impact of money-based liquidity measures against existing measures of market liquidity. I proceed to do a stock level analysis of liquidity following Pastor and Stambaugh (2003). The results indicated that measures of aggregate money supply are able to match several of the observed relationships in stock return data much better than market liquidity. At an individual stock level, monetary liquidity is a priced factor for individual stocks. Taken together, these papers support the idea that changes in the money supply have consequences for the real economy.
text

The contribution of this thesis is to build a small macro-econometric model of the Namibian economy, which demonstrates that there is significant statistical support for the hypothesis that there is a contemporaneous relationship between real wage, productivity, unemployment and interest rates in Namibia. This phenomenon has not yet been exploited using macro-econometric modelling, and thus, represents a significant contribution to modelling literature in Namibia. The determination of the sources of unemployment also receives special attention given that high unemployment is a chronic problem in Namibia. All models specified and estimated in the study use the SVAR methodology for the period 1980 to 2013. The study develops a small macro-econometric model using three modular experiments, which include, a basic model, models that separately append demand and exchange rate channels variables to the basic model, and the specification of a small macro-econometric model. The ultimate aim is to find out if monetary policy plays a role in influencing labour market and nominal variables. The hypothesis that the basic real wage, productivity, unemployment rate and interest rate system can be estimated simultaneously is validated. Further, demand and exchange rate channels variables are found to have important additional information, which explains the monetary transmission process, and that shocks to labour market variables affect monetary policy in Namibia. The results also show that the demand channel (import prices and bank credit to the private sector) and the exchange rate channel (nominal exchange rate) variables have important additional information, which affects monetary transmission process in Namibia, which justifies their inclusion in the small macro-econometric model. In addition, shocks to the import price and exchange rate in the macro-econometric model significantly affect labour market variables. However, shocks to bank credit only partially perform as expected, implying that its results need to be considered cautiously. The study further finds that tight monetary policy shocks significantly affect real and nominal variables in Namibia. The results also show that shocks to all variables in the unemployment model significantly affect unemployment, suggesting that the hysteresis assumption is corroborated. This implies that long run aggregate demand is non-neutral in Namibia.
Economics
D. Litt. et Phil. (Economics)