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The Transmission Of Monetary Policy Under The Repo System In South Africa: An Empirical Analysis♣

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  • C DE ANGELIS
  • MJ AZIAKPONO
  • A PIERRE FAURE

Abstract

The study examines the influence of the repo rate on the interbank rate and analyses whether the transmission channels of interest rates have changed since the adjustment to the repo system in September 2001. The paper employs the Granger causality test using the ECM framework. The results suggest that the influence of the repo rate on the interbank rate was stronger before the adjustments to the system were made. The interbank rate and the repo rate were found to “reverse” roles in the period after the adjustments to the system. Our results show that the changes to the repo system in 2001 did not lead to the achievement of the intended transmission channel; instead it was found that the system in place before the changes were made was in fact already achieving the transmission path that the authorities hoped to accomplish by changing the system.

Suggested Citation

  • C De Angelis & Mj Aziakpono & A Pierre Faure, 2005. "The Transmission Of Monetary Policy Under The Repo System In South Africa: An Empirical Analysis♣," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 657-673, December.
    • Handle: RePEc:bla:sajeco:v:73:y:2005:i:4:p:657-673
    DOI: 10.1111/j.1813-6982.2005.00045.x
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    References listed on IDEAS

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    1. Meshach Aziakpono & Magdalene Kasyoka Wilson & Jason Manuel, 2007. "Adjustment of Commercial Bank's Interest Rates and the Effectiveness of Monetary Policy in South Africa," The African Finance Journal, Africagrowth Institute, vol. 9(1), pages 1-20.
    2. Kevin S. Nell, 2000. "The Endogenous/Exogenous Nature of South Africa’s Money Supply Under Direct and Indirect Monetary Control Measures," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(2), pages 313-329, December.
    3. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 91, European Central Bank.
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    1. Heinrich Nel & Tadiwa Mangwengwende & Zivanemoyo Chinzara, 2011. "Bank concentration and the interest rate pass-through in Sub-Saharan African countries," Working Papers 233, Economic Research Southern Africa.
    2. Gunji, Hiroshi & Miura, Kazuki & Yuan, Yuan, 2009. "Bank competition and monetary policy," Japan and the World Economy, Elsevier, vol. 21(1), pages 105-115, January.
    3. Gideon O. Fadiran & Adebisi Edun, 2013. "An Overview of the Repo Rate in an Inflation Targeting Economy," African Development Review, African Development Bank, vol. 25(4), pages 621-635.
    4. Lumengo BONGA-BONGA, 2009. "Monetary Policy and Long Term Interest Rate in South Africa," EcoMod2009 21500016, EcoMod.
    5. H.a. Mitchell‐innes & M.j. Aziakpono & A.p. Faure, 2007. "Inflation Targeting And The Fisher Effect In South Africa: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 693-707, December.

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