Forecasting Monetary Policy Rules in South Africa

Naraidoo, Ruthira and Paya, Ivan (2012) Forecasting Monetary Policy Rules in South Africa. International Journal of Forecasting, 28 (2). pp. 446-455. ISSN 0169-2070

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Abstract

This paper is the first one to: (i) provide in-sample estimates of linear and nonlinear Taylor rules, augmented with an indicator of financial stability, for the case of South Africa, and (ii) analyse the ability of linear and nonlinear monetary policy rule specifications, as well as nonparametric and semiparametric models, to forecast the nominal interest rate setting that describes the South African Reserve Bank’s (SARB) policy decisions. Our results indicate, first, that asset prices are taken into account when setting interest rates; second, that there are nonlinearities in the monetary policy rule; and third, that forecasts constructed from semiparametric models perform particularly well over the inflation targeting regime and that there are gains from semiparametric models in forecasting the interest rates as the forecasting horizon lengthens.

Item Type:
Journal Article
Journal or Publication Title:
International Journal of Forecasting
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hb
Subjects:
ID Code:
55632
Deposited By:
Deposited On:
10 Jul 2012 10:00
Refereed?:
Yes
Published?:
Published
Last Modified:
29 Jul 2020 10:57