Do stock prices impact consumption and interest rate in South Africa? Evidence from a time-varying vector autoregressive model
dc.contributor.author | Aye, Goodness Chioma | |
dc.contributor.author | Gupta, Rangan | |
dc.contributor.author | Modise, Mampho P. | |
dc.contributor.email | rangan.gupta@up.ac.za | en_ZA |
dc.date.accessioned | 2015-08-21T08:00:57Z | |
dc.date.available | 2015-08-21T08:00:57Z | |
dc.date.issued | 2015-08 | |
dc.description.abstract | This paper investigates the existence of spillovers from stock prices onto consumption and the interest rate for South Africa using a time-varying vector autoregressive (TVP-VAR) model with stochastic volatility. In this regard, we estimate a three-variable TVP-VAR model comprising of real consumption growth rate, the nominal three-months Treasury bill rate and the growth rate of real stock prices. We find that the impact of a real stock price shocks on consumption is in general positive, with large and significant effects observed at the one-quarter ahead horizon. However, there is also evidence of significant negative spillovers from the stock market to consumption during the financial crisis, at both short and long-horizons. Monetary policy response to stock price shocks has been persistent, and strong especially post-the financial liberalization in 1985, but became weaker during the financial crisis. Overall, we provide evidence of significant time-varying spillovers on consumption and interest rate from the stock market. | en_ZA |
dc.description.librarian | hb2015 | en_ZA |
dc.description.uri | http://emf.sagepub.com | en_ZA |
dc.identifier.citation | Aye, GC, Gupta, R & Modise, MP 2015, 'Do stock prices impact consumption and interest rate in South Africa? Evidence from a time-varying vector autoregressive model', Journal of Emerging Market Finance, vol. 14, no. 2, pp. 176-196. | en_ZA |
dc.identifier.issn | 0972-6527 (print) | |
dc.identifier.issn | 0973-0710 (online) | |
dc.identifier.other | 10.1177/0972652715584267 | |
dc.identifier.uri | http://hdl.handle.net/2263/49419 | |
dc.language.iso | en | en_ZA |
dc.publisher | Sage | en_ZA |
dc.rights | © 2015 Institute for Financial Management and Research. Sage Publications. | en_ZA |
dc.subject | Bayesian inference | en_ZA |
dc.subject | Consumption | en_ZA |
dc.subject | Stock price | en_ZA |
dc.subject | Markov chain Monte Carlo (MCMC) | en_ZA |
dc.subject | Monetary policy | en_ZA |
dc.subject | Structural vector autoregression | en_ZA |
dc.subject | Stochastic volatility | en_ZA |
dc.subject | Time-varying parameter (TVP) | en_ZA |
dc.subject | Time-varying parameter vector autoregressive (TVP-VAR) | en_ZA |
dc.title | Do stock prices impact consumption and interest rate in South Africa? Evidence from a time-varying vector autoregressive model | en_ZA |
dc.type | Postprint Article | en_ZA |