Category Archives: South African Reserve bank

News from the South African Reserve bank

Working Paper – WP/17/03: Order flow and rand/dollar exchange rate dynamics

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Publish Date: 2017-12-20
Category: Working Papers
Author: Aadila Hoosain, Alta Joubert and Alain Kabundi

This paper uses the microstructure approach for the South African foreign exchange market to determine the impact of order flow on the rand/US dollar exchange rate over the short and long term. A hybrid model which combines microeconomic and macroeconomic fundamental determinants of the exchange rate has been adopted. The analysis uses monthly series from January 2004 to December 2016 and finds that order flow explains movements in the exchange rate, both in the short and in the long term. The speed of adjustment from short-term deviations is relatively slow. The results based on the rolling-window estimation of the long-run model provide evidence of a changing relationship between order flow and the exchange rate. Consistent with the literature, the results show that the rand/dollar exchange rate reacts to fundamental variables only in the long term. Unlike Meese and Rogoff (1983), who postulate that the best way to estimate the exchange rate over the short term is with a random walk model, the current study shows that the microstructure approach can be exploited to explain short-term dynamics in the exchange rate.

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Measuring shadow banking activities and exploring its interconnectedness with banks in South Africa

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Publish Date: 2017-12-15
Category: Occasional Papers
Author: Esti Kemp

​Shadow banking entities or activities and its interconnectedness with financial intermediaries raise important policy concerns. However, research in this area in South Africa remains limited. Accordingly this paper maps the financial landscape in South Africa, focusing on non-bank financial intermediaries as well as the narrower ‘shadow banking’ measure for South Africa, measured in line with guidance provided by the Financial Stability Board. The interconnectedness between financial intermediaries in South Africa is also explored and key financial stability risks in the South African financial system are highlighted. One of the most notable risks currently is the lack of data. Whilst the shadow banking system in South Africa remains relatively small when compared to global peers, its assets under management are growing at a faster pace than those of banks. Furthermore, banks in South Africa obtain a relatively large portion of their funding from non-bank financial intermediaries and generally interconnectedness among financial intermediaries in South Africa is relatively high

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December 2017 – The further development of sectoral financial balance sheets for South Africa’s integrated economic accounts

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Publish Date: 2017-12-14
Category: Quarterly Bulletins
Author: B de Beer and M Kock

​The South African Reserve Bank (SARB) has been advancing the development of sectoral balance sheet statistics for the South African economy within the context of the integrated economic accounts (IEA) framework. These statistics will extend the range of macroeconomic aggregates available for national policy formulation and contribute towards the fulfillment of South Africa’s international statistical commitments. The methodological approach used is aligned with the Group of Twenty (G20)3 Data Gaps Initiative (DGI), in particular recommendation 8 of the second phase of the DGI (DGI-2), which specifically focuses on sectoral balance sheets, flows, and a from-whom-to-whom analysis of stocks and transactions. The goal is to compile a complete and integrated set of sectoral balance sheets and accumulation accounts for South Africa covering the main institutional sectors and financial instrument categories4 as proposed in the System of National Accounts, 2008 (SNA 2008). This note focuses on the progress made with the sectoral financial balance sheet component of the IEA as indicated by the red dotted lines in Figure 1.

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