Working Paper: CEPR ID: DP5831
Authors: Janine Aron; John Muellbauer
Abstract: This paper examines the evolution of monetary policy in South Africa in 1994-2004 in terms of design, the operational framework, the South African Reserve Bank?s (SARB) understanding of monetary policy transmission and the transparency, credibility and predictability of monetary policy. Quantitative indexes of transparency in 1994 and 2004 are compared and expectations data and forward interest rate data used to assess the credibility and predictability of policy under inflation targeting. The forecasting performance of the SARB is evaluated, and monetary policy decisions taken in response to external and domestic shocks assessed. The impact of monetary policy on the level of real interest rates and the role for complementary policies are examined.
Keywords: inflation targeting; monetary policy; South Africa
JEL Codes: E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation targeting framework introduced in 2000 (E31) | improved credibility and effectiveness of macroeconomic policy in South Africa (E61) |
| inflation targeting framework introduced in 2000 (E31) | decline in inflation volatility (E31) |
| inflation targeting framework introduced in 2000 (E31) | improved per capita GDP growth (O49) |
| inflation targeting framework (E31) | reduced volatility in interest rates (E43) |
| inflation targeting framework (E31) | improved understanding of monetary policy transmission (E50) |
| shift towards flexible and transparent monetary policy framework (E63) | better economic outcomes (P17) |
| improvements in policy credibility and effectiveness (E61) | more stable economic environment (E60) |
| improvements in policy credibility and effectiveness (E61) | enhanced foreign investment prospects (F23) |