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Monetary Transmission and Policy Rules in South Africa

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  • Janine Aron

    (University of Oxford)

Abstract

South African monetary policy in the last 30 years has experienced major regime shifts. This paper finds that Taylor rules, augmented for foreign interest rate influences, and based either on forecast, or actual, inflation and output gap measures, poorly describe the behaviour of the discount rate in the relevant sub-periods. Alternative descriptions of central bank behaviour are modelled. Forecasting output, however, we find strong real and nominal interest rate effects over 30 years, though subject to a regime shift. Forecasting inflation one year ahead, it appears that monetary policy has its effect mainly via the exchange rate and the output gap, with little evidence for an influence of money supply variations. In the short-run, higher interest rates raise inflation.

Suggested Citation

  • Janine Aron, 2000. "Monetary Transmission and Policy Rules in South Africa," Econometric Society World Congress 2000 Contributed Papers 1627, Econometric Society.
    • Handle: RePEc:ecm:wc2000:1627
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    References listed on IDEAS

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    6. Muellbauer, John N J, 1996. "Income Persistence and Macro-Policy Feedbacks in the U.S," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 703-733, November.
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    8. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 363-412, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Vdovichenko Anna & Voronina Victoria, 2004. "Monetary policy rules and their application in Russia," EERC Working Paper Series 04-09e, EERC Research Network, Russia and CIS.
    2. Eliphas Ndou, 2023. "The effect of monetary policy on output using sign restriction VAR: evidence from South Africa and South Korea," Empirical Economics, Springer, vol. 64(4), pages 1979-2003, April.
    3. Vdovichenko, Anna G. & Voronina, Victoria G., 2006. "Monetary policy rules and their application in Russia," Research in International Business and Finance, Elsevier, vol. 20(2), pages 145-162, June.

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