Purpose – The purpose of this paper is to investigate how the South African Reserve Bank (SARB) sets monetary policy rate. Design/methodology/approach – Given the controversial debate on whether central banks should target asset prices for economic stability, the authors analyse whether the...

This paper compares forecast performance of linear and nonlinear monetary policy rules using South African data. Recursive forecasts values are computed for 1- to 12-steps ahead for the out-of-sample period 2006:01 to 2010:12. For the nonlinear models we use bootstrap method for multi-step ahead...

The paper extends a standard two-country international real business cycle model to include financial intermediation by banks of loans and government bonds. Taking in household deposits from home and abroad, the loans are produced by the bank in a Cobb-Douglas production approach such that a...

We explore how the ECB sets interest rates in the context of policy reaction functions. Using both real-time and revised information, we consider linear and nonlinear policy functions in inflation, output and a measure of financial conditions. We find that amongst Taylor rule models, linear and...

This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment. This model is applied to the UK and the US interwar period which is remembered as the decade of mass unemployment. The theory here sees the natural...

This paper is the first one to analyse the effect of aggregate government spending and taxes on output for South Africa using three types of a calibrated DSGE model and more data driven models such as a structural vector error correction (SVEC) model and a time-varying parameter VAR (TVP-VAR) to...