The role of the exchange rate in a new Keynesian DSGE model for the South African economy

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dc.contributor.authorAlpanda S.
dc.contributor.authorKotze K.
dc.contributor.authorWoglom G.
dc.date.accessioned2011-05-15T15:57:38Z
dc.date.available2011-05-15T15:57:38Z
dc.date.issued2010
dc.description.abstractWe build a small open economy New Keynesian dynamic stochastic general equilibrium model for South Africa similar to Steinbach et al. We abandon their assumption of complete risk sharing with the foreign economy, and introduce country risk shocks to allow deviations from uncovered interest rate parity. These changes allow us to include the exchange rate as an observable variable in the estimation of the model. Using forecast error variance decompositions and historical decompositions, we show that country risk shocks have sizable effects on the South African business cycle. We also explore the optimal monetary policy implications of our model within the context of Taylor rules. © 2010 Economic Society of South Africa.
dc.description.versionArticle
dc.identifier.citationSouth African Journal of Economics
dc.identifier.citation78
dc.identifier.citation2
dc.identifier.issn382280
dc.identifier.other10.1111/j.1813-6982.2010.01239.x
dc.identifier.urihttp://hdl.handle.net/10019.1/10509
dc.subjectBayesian analysis
dc.subjectbusiness cycle
dc.subjecteconomic conditions
dc.subjectestimation method
dc.subjectexchange rate
dc.subjectinterest rate
dc.subjectKeynesian theory
dc.subjectmonetary policy
dc.subjectnumerical model
dc.subjectSouth Africa
dc.titleThe role of the exchange rate in a new Keynesian DSGE model for the South African economy
dc.typeArticle
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