Do stock prices impact consumption and interest rate in South Africa? Evidence from a time-varying vector autoregressive model

dc.contributor.authorAye, Goodness Chioma
dc.contributor.authorGupta, Rangan
dc.contributor.authorModise, Mampho P.
dc.contributor.emailrangan.gupta@up.ac.zaen_ZA
dc.date.accessioned2015-08-21T08:00:57Z
dc.date.available2015-08-21T08:00:57Z
dc.date.issued2015-08
dc.description.abstractThis 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.librarianhb2015en_ZA
dc.description.urihttp://emf.sagepub.comen_ZA
dc.identifier.citationAye, 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.issn0972-6527 (print)
dc.identifier.issn0973-0710 (online)
dc.identifier.other10.1177/0972652715584267
dc.identifier.urihttp://hdl.handle.net/2263/49419
dc.language.isoenen_ZA
dc.publisherSageen_ZA
dc.rights© 2015 Institute for Financial Management and Research. Sage Publications.en_ZA
dc.subjectBayesian inferenceen_ZA
dc.subjectConsumptionen_ZA
dc.subjectStock priceen_ZA
dc.subjectMarkov chain Monte Carlo (MCMC)en_ZA
dc.subjectMonetary policyen_ZA
dc.subjectStructural vector autoregressionen_ZA
dc.subjectStochastic volatilityen_ZA
dc.subjectTime-varying parameter (TVP)en_ZA
dc.subjectTime-varying parameter vector autoregressive (TVP-VAR)en_ZA
dc.titleDo stock prices impact consumption and interest rate in South Africa? Evidence from a time-varying vector autoregressive modelen_ZA
dc.typePostprint Articleen_ZA

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