Most of the growth in international production over the past decade has been carried out via cross-border mergers and acquisitions. Yet previous empirical work relating to CBM&As has been confined to firm-specific factors. This is against the backdrop that researchers have not been able to develop a coherent theory explaining the increasing trends of CBM&As activity. Building on prior studies, this study attempts to extend the few existing studies by using a simple empirical nonlinear framework to analyse the number of cross-border mergers and acquisitions inflows between 1987 and 2008 into the UK from a macroeconomic perspective. The main findings are that the response of the inflow is asymmetric as there is more persistence during stock market booms versus recessions. There are asymmetries with respect to relative prices suggesting that an improvement in the terms of trade leads to higher inflows once the growth of stock prices is above a threshold level of 8%. Other factors which have significant bearing on CBM&As inflows are the rate of inflation and growth in real GDP.
A simple empirical nonlinear framework is used to analyze monetary policy between 1983 and 2007 in South Africa, focusing on the policy of inflation targeting introduced in Feb 2000, more precisely when the South African Reserve Bank (SARB) announced that an inflation zone targeting regime of 3-6% would be in place. We find that a model specification embodying a simple ‘inflation learning rule’ for the future inflation rate seems to provide a better understanding of the decision process made by the SARB in its interest rate setting policy. The main findings are: 1) that the adoption of inflation targeting led to significant changes in monetary policy, 2) post-2000 monetary policy is asymmetric as policymakers respond more to downward deviation of inflation away from the target, 3) post-2000 policymakers may be attempting to keep inflation within the 4.5%–6.9% range rather than pursuing a target zone of 3-6%, as generally pre-announced, and 4) the response of monetary policy to inflation is nonlinear as interest rates respond more when inflation is further from the target.
We test the concept of the Opportunistic Approach to monetary policy in South Africa post 2000 inflation targeting regime. The paper contributes to the current debate on central banks having additional objectives over and above inflation and output by incorporating a measure of financial conditions in the modelling framework. Our findings support the two features of the opportunistic approach. First, we find that the models that include an intermediate target that reflects the recent history of inflation rather than simple inflation target improve the fit of the models. Second, the data supports the view that the South African Reserve Bank (SARB) behaves with some degree of nonresponsiveness when inflation is within the zone of discretion but react aggressively otherwise.Recursive estimates from our preferred model reveal that overall there has been a subdued reaction to inflation, output and financial conditions amidst the increased economic uncertainty of the 2007-2009 financial crisis.
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