Page 33 - University of Pretoria Research Review 2017

Foreword
Introductory Messages
DEVELOPMENT AND CHANGE
The Economy
Modelling and forecasting market behaviour
Rangan Gupta, Department of Economics
Professor Rangan Gupta in the Department of Economics is a prolific writer who in recent years
has consistently been placed among the top young economists globally in the Research Papers in Economics (RePEc) rankings, a bibliographic database of research in economics. His research interests are mainly in monetary theory and policy, and time series econometrics, while he also works in areas such as health economics, energy economics, environmental economics, socio-economics, real estate economics
and finance. These issues are of great importance with respect to policymaking in any economy, but more so in developing countries and emerging economies. Hence, his research has not only dealt with the developed economies of the world, but also emerging markets, including South Africa.
In 2017 alone, Professor Gupta co-authored 69 papers, and considers his most important contribution a paper published in a special issue of Empirical Economics*. The paper forms part of a long-term research agenda, which he initiated more than a decade ago, whereby the idea was to develop Dynamic Stochastic General Equilibrium (DSGE) models for South Africa to model and forecast business cycles. The models are immune to the problems associated with standard econometric models, which are widely used for such purposes.
Using the DSGE framework, Professor Gupta, with his co-authors, has worked on many issues relating to South African business cycles, including the roles
* This paper appears in a special issue of Empirical Economics in the honour of well-known econometrician, Professor Kajal Lahiri, and is on the invitation of the editor, Professor Badi H Baltagi, a world-renowned econometrician himself.
of productivity, monetary policy, asset markets and commodity market shocks. More recently, the South African Reserve Bank has developed its own DSGE model, which validates the usefulness of this approach. The linear framework of the DSGE model has also
been extended to a nonlinear structure which, in turn, requires the usage of particle filters. In the 2017 paper, they seek to identify evidence of regime-switching behaviour in the monetary policy response function and the variance of the shocks.
This model, the first of its kind developed for South Africa, makes two important contributions. It shows that in-sample and out-of-sample model behaviour can be quite different; thus, it is important not to rely on standard measures of model fit. Similarly, the paper confirms that the South African Reserve Bank has been consistent in its behaviour.
PEOPLE AND CONTEXTS
HEALTH AND WELL-BEING
PLANET AND SUSTAINABILITY
Awards
Lead Researchers
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The volatility of markets, and policymaking to guide economic decisions in developed and emerging markets, are complex terrains for researching macroeconomic variables that affect market behaviour.