Has US (Un)Conventional Monetary Policy Affected South African Financial Markets in the Aftermath of COVID-19? A Quantile–Frequency Connectedness Approach

Mashilana Ngondo and Andrew Phiri ()
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Mashilana Ngondo: Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth 6031, South Africa
Andrew Phiri: Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth 6031, South Africa

IJFS, 2025, vol. 13, issue 3, 1-25

Abstract: The US has undertaken both unconventional and conventional monetary policy stances in response to the COVID-19 pandemic and the Ukraine–Russia conflict, and there has been much debate on the effects of these various monetary policies on global financial markets. Our study considers the debate in the context of South Africa and uses the quantile–frequency connectedness approach to examine static and dynamic systemic spillover between the US shadow short rate (SSR) and South African equity, bond and currency markets between 1 December 2019 and 2 March 2023. The findings from the static analysis reveal that systemic connectedness is concentrated at their tail-end quantile distributions and US monetary policy plays a dominant role in transmitting these systemic shocks, albeit these shocks are mainly high frequency with very short cycles. However, the dynamic estimates further reveal that US monetary policy exerts longer-lasting spillover shocks to South African financial markets during periods corresponding to FOMC announcements of quantitative ‘easing’ or ‘tapering’ policies. Overall, these findings are useful for evaluating the effectiveness of the Reserve Bank’s macroprudential policies in ensuring market efficiency, as well as for enhancing investor decisions, portfolio allocation and risk management.

Keywords: unconventional monetary policies; shadow short rate; equity markets; debt markets; currency markets; quantile-frequency connectedness; South Africa (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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