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The Role Of Commodity Prices In Macroeconomic Policy In South Africa

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  • Matthew kofi Ocran
  • Nicholas Biekpe

Abstract

This paper examines whether commodity prices can be used as signal for informing macroeconomic policy in South Africa using the new approach for testing Granger causality developed by Toda and Yamamoto (1995 ). Evidence of causality from average gold price to interest rate, money, exchange rate and the consumer price index was observed. Again, evidence of causality was observed from metals price index to interest rate, money and exchange rate. The results suggest there is merit in using South Africa's average gold price and the metals price index of the International Monetary Fund as informational variables in setting monetary policy. Copyright (c) 2007 The Authors; Journal compilation (c) Economic Society of South Africa 2007.

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Bibliographic Info

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 75 (2007)
Issue (Month): 2 (06)
Pages: 213-220

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Handle: RePEc:bla:sajeco:v:75:y:2007:i:2:p:213-220

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  1. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, World Bank Group, vol. 14(2), pages 251-85, May.
  2. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 533-540, May.
  3. Reinhart, Carmen & Wickham, Peter, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," MPRA Paper 8173, University Library of Munich, Germany.
  4. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(2), pages 365-381, March.
  5. Angus Deaton & Guy Laroque, 1990. "On The Behavior of Commodity Prices," NBER Working Papers 3439, National Bureau of Economic Research, Inc.
  6. John T. Cuddington & Hong Liang, 1998. "Commodity Price Volatility Across Exchange Rate Regimes," International Finance, EconWPA 9802003, EconWPA, revised 11 May 1998.
  7. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  8. Marina Marinkov & Philippe Burger, 2005. "The Various Dimensions Of Commodity Dependence In Africa," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 73(2), pages 269-291, 06.
  9. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 475-512, May.
  10. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, vol. 84(1), pages 24-46, March.
  11. Jan Gunning & Paul Collier, 1996. "Policy towards Commodity Shocks in Developing Countries," IMF Working Papers 96/84, International Monetary Fund.
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Cited by:
  1. A.F.M. Kamrul Hassan & Ruhul A. Salim, 2011. "Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, Queensland University of Technology (QUT), School of Economics and Finance, vol. 41(3), pages 205-216, December.

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