Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Forecasting Monetary Policy Rules in South Africa
AU - Naraidoo, Ruthira
AU - Paya, Ivan
PY - 2012/4
Y1 - 2012/4
N2 - This paper is the first one to: (i) provide in-sample estimates of linear and nonlinear Taylor rules, augmented with an indicator of financial stability, for the case of South Africa, and (ii) analyse the ability of linear and nonlinear monetary policy rule specifications, as well as nonparametric and semiparametric models, to forecast the nominal interest rate setting that describes the South African Reserve Bank’s (SARB) policy decisions. Our results indicate, first, that asset prices are taken into account when setting interest rates; second, that there are nonlinearities in the monetary policy rule; and third, that forecasts constructed from semiparametric models perform particularly well over the inflation targeting regime and that there are gains from semiparametric models in forecasting the interest rates as the forecasting horizon lengthens.
AB - This paper is the first one to: (i) provide in-sample estimates of linear and nonlinear Taylor rules, augmented with an indicator of financial stability, for the case of South Africa, and (ii) analyse the ability of linear and nonlinear monetary policy rule specifications, as well as nonparametric and semiparametric models, to forecast the nominal interest rate setting that describes the South African Reserve Bank’s (SARB) policy decisions. Our results indicate, first, that asset prices are taken into account when setting interest rates; second, that there are nonlinearities in the monetary policy rule; and third, that forecasts constructed from semiparametric models perform particularly well over the inflation targeting regime and that there are gains from semiparametric models in forecasting the interest rates as the forecasting horizon lengthens.
KW - Taylor rules
KW - nonlinearity
KW - Nonparametric
KW - Semiparametric
KW - Forecasting
U2 - 10.1016/j.ijforecast.2011.04.006
DO - 10.1016/j.ijforecast.2011.04.006
M3 - Journal article
VL - 28
SP - 446
EP - 455
JO - International Journal of Forecasting
JF - International Journal of Forecasting
SN - 0169-2070
IS - 2
ER -