Identifying an index of financial conditions for South Africa

Show simple item record Thompson, Kirsten L. Van Eyden, Renee Gupta, Rangan 2016-04-21T05:11:30Z 2016-04-21T05:11:30Z 2015
dc.description.abstract The global financial crisis that began in 2007-08 demonstrated how severe the impact of financial markets’ stress on real economic activity can be. In the wake of the financial crisis policy-makers and decision-makers across the world identified the critical need for a better understanding of financial conditions, and more importantly, their impact on the real economy. To this end, we have constructed a financial conditions index (FCI) for the South African economy, to enable the gauging of financial conditions and to better understand the macro-financial linkages in the country. The FCI is constructed using monthly data over the period 1966 to 2011, and is based on a set of sixteen financial variables, which include variables that define the state of international financial markets, asset prices, interest rate spreads, stock market yields and volatility, bond market volatility and monetary aggregates. We explore different methodologies for constructing the FCI, and find that recursive principal components analysis (PCA) yields the best result. We furthermore investigate whether it is beneficial to purge the FCI of the real effects of inflation, economic growth and interest rates, and use the identified FCI in causality testing with three macroeconomic variables. en_ZA
dc.description.department Economics en_ZA
dc.description.librarian hb2016 en_ZA
dc.description.uri en_ZA
dc.description.uri en_ZA
dc.identifier.citation Kirsten Thompson, Renee Van Eyden, Rangan Gupta (2015),"Identifying an index of financial conditions for South Africa", Studies in Economics and Finance, Vol. 32, Iss 2 , pp. 256 - 274. en_ZA
dc.identifier.issn 1086-7376 (print)
dc.identifier.issn 1755-6791 (online)
dc.identifier.other 10.1108/SEF-07-2013-0098
dc.language.iso en en_ZA
dc.publisher Emerald en_ZA
dc.rights © Emerald Group Publishing Limited. en_ZA
dc.subject Financial conditions en_ZA
dc.subject Financial crisis en_ZA
dc.subject Principal components en_ZA
dc.title Identifying an index of financial conditions for South Africa en_ZA
dc.type Postprint Article en_ZA

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