Does the SARB respond to oil price movements? Historical evidence from the frequency domain

Aye, Goodness C.; Gadinabokao, Olorato; Gupta, Rangan

doi:10.1080/15567249.2014.966927

Cited by 6 publications

(1 citation statement)

References 16 publications

(13 reference statements)

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“…This is because of its ability to affect the stock market through changes in expected cash flows and/or the discount rate, output, monetary and fiscal policy decisions, as well as macroeconomic and financial uncertainties (Degiannakis et al, 2018;Smyth and Narayan, 2018). In the context of South Africa, the significant impact of oil shocks on wide array of recent movements of economic and financial variables (including the stock market) is quite well-established (see for example, Gupta and Modise (2013b), Chisadza et al, (2016), Aye et al, (2017b), Balcilar et al, (2017Balcilar et al, ( , 2018a, , ), and hence can be expected to be an encapsulating metric for the information contained in such predictors.…”

Section: Introductionmentioning

confidence: 99%

Commodity Prices and Forecastability of International Stock Returns over a Century: Sentiments versus Fundamentals with Focus on South Africa

Salisu

Gupta

2021

Emerging Markets Finance and Trade

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We forecast real stock returns of South Africa over the monthly period of 1915:01 to 2021:03 using real oil, gold and silver prices, based on an autoregressive type distributed lag model that controls for persistence and endogeneity bias. Oil price proxies for fundamentals, while gold and silver prices capture sentiments. We find that the metrics for fundamentals and sentiments both predict real stock returns of South Africa, with nonlinearity, modelled by decomposing these prices into their respective positive and negative counterparts, playing an important role in terms of forecasting when a longer out-of-sample period spanning over three-quarters of a century is used. When compared to fundamentals, sentiments, particularly real gold prices, have a relatively stronger role to play in forecasting real stock returns. Further, the predictability of stock returns emanating from fundamentals and sentiments is in line with the findings over the same period derived for two other advanced markets namely, the United Kingdom (UK) and the United States (US), but the stock market of another emerging economy, i.e., India covering 1920:08 to 2021:03, unlike South Africa, is found to be completely unpredictable. In other words, South Africa, in terms of its predictability, behaves like a developed stock market. Finally, given the importance of platinum and palladium for South Africa, our forecasting exercise based on their real prices over 1968:01 to 2021:03, depicts strong predictive content for real stock returns, thus again highlighting the importance of behavioral variables. However, these prices do not necessarily contain additional information over what is already available in gold, silver and oil real prices. Our results have important implications for academicians, investors and policymakers.

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Section: Introductionmentioning

confidence: 99%

Commodity Prices and Forecastability of International Stock Returns over a Century: Sentiments versus Fundamentals with Focus on South Africa

Salisu

Gupta

2021

Emerging Markets Finance and Trade

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The impact of digital finance on the natural resource market: Evidence from DeFi, oil, and gold

et al. 2022

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The Impact of Oil Shocks in a Small Open Economy New-Keynesian Dynamic Stochastic General Equilibrium Model for an Oil-Importing Country: The Case of South Africa

Hollander

Gupta

Wohar

2018

Emerging Markets Finance and Trade

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This paper studies the effects of foreign (real) oil price shocks on key macroeconomic variables for South Africa: a net-importer of oil. We develop and estimate a small open economy new-Keynesian dynamic stochastic general equilibrium model with a role for oil in consumption and production. The substitutability of oil for capital and consumption goods is low, import price pass-through is incomplete, domestic and foreign prices and wages are sticky, and the uncovered interest rate parity condition holds imperfectly. Foreign real oil price shocks have a strong and persistent effect on domestic production and consumption activities and, hence, are a fundamental driver of output, inflation and interest rates in both the short-and long-run. Oil price shocks also generate a tradeoff between output and inflation stabilisation. As a result, episodes of endogenous tightening of monetary policy slow the recovery of South Africa's real economy. Our findings go further to suggest an important role for oil prices in predicting the South African output during and after the recession that followed the 2008 global financial crisis.

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Does the SARB respond to oil price movements? Historical evidence from the frequency domain

Cited by 6 publications

References 16 publications

Commodity Prices and Forecastability of International Stock Returns over a Century: Sentiments versus Fundamentals with Focus on South Africa

Commodity Prices and Forecastability of International Stock Returns over a Century: Sentiments versus Fundamentals with Focus on South Africa

The impact of digital finance on the natural resource market: Evidence from DeFi, oil, and gold

The Impact of Oil Shocks in a Small Open Economy New-Keynesian Dynamic Stochastic General Equilibrium Model for an Oil-Importing Country: The Case of South Africa

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