Template-Type: ReDIF-Article 1.0 Title: The Exchange Rate Pass-Through: Evidence of South Africa Author-Name: Nozipho Sinenhlanhla DUBE Author-Name: Simiso MSOMI Author-Workplace-Name: University of KwaZulu Natal Author-Workplace-Name: University of KwaZulu Natal Author-Email: 220031975@stu.ukzn.ac.za Author-Email: msomis2@ukzn.ac.za Classification-JEL: E31, E52, F31, C32. Keywords: Exchange Rate; Pass-through; Import; Exports; Prices; Depreciation. Abstract: Understanding the role of the exchange rate behaviour in domestic prices is crucial for monetary authorities in anticipating inflation. Over the last 28 years (1994 – 2022), the inflation rate in South Africa has increased, averaging at 5.7% per year. It is believed that some of the increase in the inflation rate is a result of trade, hence this study aims at identifying how much of the changes in the exchange rate is passed on to domestic inflation. This idea is of interest in a country like South Africa that had implemented inflation targeting. The study identifies two channels of the exchange rate pass-through (ERPT); direct and indirect. the direct involves the change in import prices that is associated with the change in the exchange rate. The indirect channel involves the change in consumer price index (CPI) and the producer price index (PPI) that is associated with a change in import prices. The study uses monthly data from 1994 – 2022 to identify the speed and the magnitude of the exchange rate pass-through to domestic prices in the short-run and the long-run. Using the vector autoregressive model (VAR) and the vector error correction model the results shows that the magnitude of the exchange rate pass-through to import prices is relatively higher than the exchange pass-through to the CPI and PPI and that import prices; CPI and PPI increases immediately after an increase in the exchange rate. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 1 Pages: 23-47 DOI: 10.1991/jefa.v9i1.a75 File-URL: https://ojs.tripaledu.com/jefa/article/download/103/109 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0079 Template-Type: ReDIF-Article 1.0 Title: The Influence of Political, Economic, and Financial Risks on the South African Global Equity Portfolio Returns under Changing Market Conditions Author-Name: Sandisele JAFFAR Author-Name: Thomas HABANBAKIZE Author-Name: Fabian MOODLEY Author-Name: Paul-Francois MUZINDUTSI Author-Workplace-Name: University of KwaZulu-Natal Author-Workplace-Name: University of Johannesburg Author-Workplace-Name: North-West University Author-Workplace-Name: University of KwaZulu-Natal Author-Email: info@ukzn.ac.za Author-Email: thabanabakize@uj.ac.za Author-Email: 55232345@nwu.ac.za Author-Email: MuzindutsiP@ukzn.ac.za Classification-JEL: E44, G15, G41. Keywords: Country Risk; Equity; Market Conditions; Markov Switching Model. Abstract: Country risk is one of major determinants of investors’ decisions in pursuit of diversification opportunities and equity portfolio returns maximisation. This study investigates the effect of disaggregated country risk on South African global equity portfolio returns under fluctuating market conditions. Markov regime switching model was applied monthly data from January 2000 to December 2019. The study findings revealed that the foreign equity portfolio market moves between inefficiency and efficiency. Implying that country risks impact equity portfolio returns in foreign countries and the latter changes with market conditions. The results also indicated that more equity portfolios stay in bear market for extended periods compared to the amount of time spent in bull market. In other words, foreign portfolio equity market has been dominated by declining returns over the sample period. Additionally, all the assessed portfolios were affected by the country risk components. Yet, political risk proved to have dominant effect on foreign portfolios than other risk components. Consequently, political risk cannot be diversified through investing in alternative foreign portfolios. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 1 Pages: 48-71 DOI: 10.1991/jefa.v9i1.a76 File-URL: https://ojs.tripaledu.com/jefa/article/download/104/110 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0080 Template-Type: ReDIF-Article 1.0 Title: Public Spending- Private Investment Nexus in South Africa Author-Name: Ntokozo NZIMANDE Author-Name: Mathias MANGZVANE Author-Name: Mduduzi BIYASE Author-Workplace-Name: University of Johannesburg Author-Workplace-Name: University of Johannesburg Author-Workplace-Name: University of Religions & Denominations Author-Email: ntokozon@uj.ac.za Author-Email: mathias.manguzvane@resbank.co.za Author-Email: mbiyase@uj.ac.za Classification-JEL: E31, E39. Keywords: Crowd-in; Crowd-out; Investment; Military; Education; Government Spending. Abstract: This paper empirically investigates the association between different components of government spending and private investment in South Africa. Using autoregressive distributed lags (ARDL) analysis, we examine data span5ning from 2005q2 and 2022q1. Our results reveal distinct impacts of various government spending components on private investment. Specifically, we find that education spending has a significant effect in the long run but lacks significant short-term impact. Moreover, expenditures on housing and environmental protection stimulate investment, indicating a crowding-in effect. Conversely, health spending shows a negative long-term effect on investment, although its short-term impact is not significant. Notably, military expenditure is found to detrimentally affect private investment in South Africa. Our findings suggest the potential for reallocating resources among different spending categories without necessarily undermining investment. Furthermore, they underscore the potential for enhancing investment and fostering growth in South Africa by channelling more resources toward education, environmental protection, and housing. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 1 Pages: 72-91 DOI: 10.1991/jefa.v9i1.a77 File-URL: https://ojs.tripaledu.com/jefa/article/download/105/111 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0081 Template-Type: ReDIF-Article 1.0 Title: Does Options Bolster Capital Markets in South Africa? Author-Name: Mahlatse MABEBA Author-Workplace-Name: South African Institute of Financial Markets Author-Email: mahlatsemabeba@gmail.com Classification-JEL: C32, G12, G23. Keywords: Options; Capital Markets; Quantile Regression; South Africa. Abstract: This study examines the impact of option on South African’s capital markets over the period 1991–2020. Using put–call open interest ratios (PCOIR) and put–call volume ratios (PCVR), we test whether option sentiment provides predictive signals beyond conventional macro-financial variables. Applying quantile regression with robustness checks for asymmetry, regime dependence, and macro-financial interactions, we find that option sentiment significantly predicts equity and bond returns, with bearish signals exerting stronger effects than bullish ones. The predictive influence intensifies during periods of heightened volatility and financial stress, and its strength varies with liquidity conditions and monetary policy stance. Overall, the findings show that option sentiment is both a reflection of investor expectations and a driver of asset price dynamics, underscoring its informational role in South Africa’s capital markets. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 1 Pages: 1-22 DOI: 10.1991/jefa.v9i1.a74 File-URL: https://ojs.tripaledu.com/jefa/article/download/102/108 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0082 Template-Type: ReDIF-Article 1.0 Title: Inflation Dynamics and the New Keynesian Phillips Curve in Sub-Saharan Africa Author-Name: Femi Akinlade Author-Workplace-Name: Global Open University Author-Email: fakinlade@gmail.com Classification-JEL: E31; E12; C23; E52; O55. Keywords: New Keynesian Phillips Curve; Inflation Dynamics; Sub-Saharan Africa; Expectations; Marginal Costs; Panel GMM. Abstract: This paper empirically investigates inflation dynamics in Sub-Saharan African economies within a New Keynesian Phillips Curve framework over the period 1995–2024. While the Phillips Curve has been extensively examined in advanced economies, evidence from Sub-Saharan Africa remains fragmented and inconclusive. Using a panel of Sub-Saharan African countries and a hybrid New Keynesian Phillips Curve estimated via Generalized Method of Moments, the study evaluates the relative importance of forward-looking expectations, inflation persistence, and real economic slack. The findings indicate that inflation in the region is characterized by strong persistence and a limited forward-looking component, with marginal costs providing a more robust measure of inflationary pressure than output gaps. The Phillips relationship weakens substantially during periods of macroeconomic instability, supporting the view that the inflation–activity trade-off in Sub-Saharan Africa is conditional on the economic environment. The results highlight the importance of structural and institutional factors in shaping inflation dynamics and suggest that standard New Keynesian models require regional adaptation when applied to low- and middle-income economies. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 2 Pages: 1-15 DOI: 10.1991/jefa.v9i2.a78 File-URL: https://ojs.tripaledu.com/jefa/article/download/106/112 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0083 Template-Type: ReDIF-Article 1.0 Title: Inflation Dynamics and Digitalization Author-Name: Boris YASHNIKOV Author-Workplace-Name: ESADE Business School Author-Email: byashnikov@gmail.com Classification-JEL: E31, E52, O33, C23. Keywords: Phillips Curve; Digitalization; Inflation Dynamics; New Keynesian Phillips Curve; Expectations; Price Stickiness. Abstract: This paper examines how digitalization reshapes inflation dynamics by conditioning the slope and persistence of the Phillips Curve within a New Keynesian framework. Using U.S. quarterly data from 1990Q1 to 2024Q4, the study estimates backward-looking, forward-looking, and hybrid New Keynesian Phillips Curves via Generalized Method of Moments, embedding digital intensity as a structural modifier of the inflation–slack transmission mechanism. The results show that U.S. inflation dynamics are best characterized by a hybrid Phillips Curve in which forward-looking expectations dominate but inflation persistence remains non-negligible. While the inflation response to real activity is modest when slack is measured by the output gap, it becomes substantially stronger when proxied by real marginal costs. Crucially, digitalization significantly weakens the pass-through from both output gaps and marginal costs to inflation, flattening the Phillips slope as digital intensity rises, while leaving the forward-looking component largely intact. These findings suggest that digitalization does not eliminate the Phillips Curve but transforms its transmission channel, offering a structural explanation for the coexistence of subdued inflation responsiveness and expectation-driven pricing in the digital era. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 2 Pages: 17-32 DOI: 10.1991/jefa.v9i2.a79 File-URL: https://ojs.tripaledu.com/jefa/article/download/107/113 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0084 Template-Type: ReDIF-Article 1.0 Title: Cryptocurrency Volatility as a Digital Cost-Push Shock Author-Name: Shen ZHANG Author-Workplace-Name: London School of Commerce Author-Email: sszhang97@gmail.com Classification-JEL: E31; E52; F41; G15. Keywords: New Keynesian Phillips Curve; Cryptocurrency Volatility; Cost-Push Shocks; Inflation Dynamics; Digital Finance. Abstract: This paper examines whether cryptocurrency market volatility operates as an auxiliary cost-push pressure within the New Keynesian Phillips Curve framework. Using quarterly data for the United States from 2010Q1 to 2025Q1, we estimate closed- and open-economy hybrid NKPC specifications augmented with an aggregate measure of crypto volatility constructed from the Garman–Klass estimator applied to the top 100 cryptocurrencies by market capitalization. Crypto volatility is interpreted as capturing digital-financial uncertainty, energy-cost pressures, and expectation-related effects that are not fully reflected in standard macroeconomic variables. Generalized Method of Moments estimations indicate that crypto volatility enters inflation dynamics with a consistently positive coefficient in forward-looking and hybrid specifications, while remaining insignificant in purely backward-looking models. Controlling for crypto volatility slightly attenuates the estimated Phillips curve slope, suggesting that digital financial instability conditions observed inflation–slack relationships rather than replacing them. Overall, the findings point to cryptocurrency markets as a complementary transmission channel linking financial volatility and inflation dynamics in the post-2010 U.S. economy. Journal: Journal of Economics and Financial Analysis Year: 2025 Volume: 9 Issue: 2 Pages: 33-48 DOI: 10.1991/jefa.v9i2.a80 File-URL: https://ojs.tripaledu.com/jefa/article/download/108/114 File-Format: application/pdf Handle: RePEc:trp:01jefa:jefa0085