Financial contagion and the transmission of the 2007 US financial crisis to South Africa
- Authors: Phelps, Barry Keith
- Date: 2012
- Subjects: Global Financial Crisis, 2008-2009 , Stock exchanges -- South Africa , Transmission mechanism (Monetary policy) -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9021 , http://hdl.handle.net/10948/d1019714
- Description: The topic of financial contagion has attracted increased attention in economic literature over the past three decades; in particular after the Asian crisis of 1997. This dissertation investigates financial contagion and its effects on South Africa after the 2007 global financial crisis. In particular, it examines whether South Africa experienced contagion from the United States stock market to its own over the period 1 July 2007 to 1 April 2009 within the strict definition of contagion or otherwise: the fraction of exceedance events in the stock market that is left unexplained by its own covariates but is explained by the exceedance from another region. This is tested empirically with a binomial-nominal logistic model. In addition to this, various financial and trade transmission mechanisms are tested to empirically determine through which channels the crisis was propagated. The analysis makes use of quarterly data from January 2002 to April 2009, within an OLS framework, with a dummy variable differentiating the periods before and after the collapse of Lehman Brothers. The findings suggest that contagion was in fact not present in this crisis, which speaks to market rationality and indicates that the South African stock market did in fact react rationally to a changing macroeconomic environment over this period. The transmission mechanism analyses indicate that there was a change in the interdependence relationship between the two stock markets following the crash of Lehman Brothers in September 2008. It is apparent that both trade and financial variables played significant roles in the propagation of this crisis.
- Full Text:
- Date Issued: 2012
- Authors: Phelps, Barry Keith
- Date: 2012
- Subjects: Global Financial Crisis, 2008-2009 , Stock exchanges -- South Africa , Transmission mechanism (Monetary policy) -- South Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:9021 , http://hdl.handle.net/10948/d1019714
- Description: The topic of financial contagion has attracted increased attention in economic literature over the past three decades; in particular after the Asian crisis of 1997. This dissertation investigates financial contagion and its effects on South Africa after the 2007 global financial crisis. In particular, it examines whether South Africa experienced contagion from the United States stock market to its own over the period 1 July 2007 to 1 April 2009 within the strict definition of contagion or otherwise: the fraction of exceedance events in the stock market that is left unexplained by its own covariates but is explained by the exceedance from another region. This is tested empirically with a binomial-nominal logistic model. In addition to this, various financial and trade transmission mechanisms are tested to empirically determine through which channels the crisis was propagated. The analysis makes use of quarterly data from January 2002 to April 2009, within an OLS framework, with a dummy variable differentiating the periods before and after the collapse of Lehman Brothers. The findings suggest that contagion was in fact not present in this crisis, which speaks to market rationality and indicates that the South African stock market did in fact react rationally to a changing macroeconomic environment over this period. The transmission mechanism analyses indicate that there was a change in the interdependence relationship between the two stock markets following the crash of Lehman Brothers in September 2008. It is apparent that both trade and financial variables played significant roles in the propagation of this crisis.
- Full Text:
- Date Issued: 2012
An empirical investigation of the balance sheet channel of monetary policy transmission in South Africa
- Authors: Kelvin, Mudita
- Date: 2009-12
- Subjects: Transmission mechanism (Monetary policy) -- South Africa , Financial statements
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/24106 , vital:62375
- Description: The intention of this study is to outline an empirical framework of the balance sheet channel of monetary policy transmission in South Africa. Specifically, this study examines how monetary policy decisions are transmitted, through the balance sheet of business firms, to the real economy. The study is motivated by the fact that credit has now occupied an important role in the funding of new capital investment in South Africa. Thus, the balance sheet channel may become a relevant channel in the monetary policy transmission process. This study augments the co integration and vector auto regression (VAR) analysis with impulse response and variance decomposition analyses to provide evidence for the balance sheet channel. The study employs quarterly South African data covering the period 1980 to 2008. For that purpose, The VAR model will contain the following variables, Bank rate (monetary policy effect), External finance premium (information asymmetry channel), stock market capitalization (to cater for the collateral channel), Changes in industrial and commercial inventories (cashflows channel), credit extension (to cater for the effect of credit demand), and gross domestic product (to cater for the aggregate shock). The study finds evidence in support of the balance sheet channel of monetary policy transmission in South Africa. The channel is weak as proved by the results. Therefore, the balance sheet channel should not be neglected from both the policy perspective and academic literature point of view in South Africa. However, the findings may only pertain to idiosyncratic economic developments during the sample period, while not necessarily serving as a best guide as to how the South African economy would work in the future. , Thesis (MCom) -- Faculty of Management and Commerce, 2009
- Full Text:
- Date Issued: 2009-12
- Authors: Kelvin, Mudita
- Date: 2009-12
- Subjects: Transmission mechanism (Monetary policy) -- South Africa , Financial statements
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/24106 , vital:62375
- Description: The intention of this study is to outline an empirical framework of the balance sheet channel of monetary policy transmission in South Africa. Specifically, this study examines how monetary policy decisions are transmitted, through the balance sheet of business firms, to the real economy. The study is motivated by the fact that credit has now occupied an important role in the funding of new capital investment in South Africa. Thus, the balance sheet channel may become a relevant channel in the monetary policy transmission process. This study augments the co integration and vector auto regression (VAR) analysis with impulse response and variance decomposition analyses to provide evidence for the balance sheet channel. The study employs quarterly South African data covering the period 1980 to 2008. For that purpose, The VAR model will contain the following variables, Bank rate (monetary policy effect), External finance premium (information asymmetry channel), stock market capitalization (to cater for the collateral channel), Changes in industrial and commercial inventories (cashflows channel), credit extension (to cater for the effect of credit demand), and gross domestic product (to cater for the aggregate shock). The study finds evidence in support of the balance sheet channel of monetary policy transmission in South Africa. The channel is weak as proved by the results. Therefore, the balance sheet channel should not be neglected from both the policy perspective and academic literature point of view in South Africa. However, the findings may only pertain to idiosyncratic economic developments during the sample period, while not necessarily serving as a best guide as to how the South African economy would work in the future. , Thesis (MCom) -- Faculty of Management and Commerce, 2009
- Full Text:
- Date Issued: 2009-12
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