Explore publications.

This article investigates the nature of the relationship and the effects of changes in oil prices on South Africa's exchange rate. It fills an essential gap in comprehending how oil price shocks influence emerging market economic dynamics. Through the use of a Bayesian Vector Auto-Regressive (BVAR) model, this study finds that the initial oil price shock to exchange rates is weakly positive in the short run, reflecting a 1% increase in oil prices, leading to a 0.08% exchange rate appreciation. The study also finds an asymmetrical relationship between oil prices and exchange rates. These effects become more pronounced when global uncertainty is at its peak. These findings have implications for shaping policies in South Africa. Exchange rate stability strategies could involve diversifying energy sources and introducing risk-hedging methods while striving for stability through flexible monetary and fiscal policies. This research also adds to the ongoing conversation about the susceptibility of emerging market currencies to external pressures, serving as a reference point for examining comparable economies. This research enriches the existing body of knowledge by addressing methodological gaps and providing a contemporary analysis of South Africa's exchange rate dynamics in a post-crisis global economy.

The pricing of six highly liquid futures commodity contracts is investigated using a Markov switching procedure. The data set spans an exceptionally turbulent period, characterized by a complex interplay of economic/financial and political shocks. Markov switching analysis exploits time series nonlinearity to identify the nature and the timing of the implicit changes of regime. Building on a HAM framework, we use the time varying parameterization of the transition probability estimates to link these shifts to exogenous variables. We provide in this way additional information on the co-movement of the time series and on their regime shifts, eventually conducive to herding pricing behaviour. The WTI oil futures price and DJIA stock index are used as proxies for global shocks as they turn out to be the main common drivers of the changes in regime of most futures commodity prices.