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Estimating monetary policy rules for South Africa
Janine Aron,John Muellbauer +1 more
TLDR
This article analyzed the conduct of monetary policy, describing the historical record and institutions of monetary policies, and formally modelling extended Taylor rules for interest rate policy formation, and found weak evidence for structural breaks reflecting competing balance of payments considerations.Abstract:
South African monetary policy has experienced major shifts, with three broad monetary policy regimes since the 1960s. This paper analyses the conduct of monetary policy, describing the historical record and institutions of monetary policy, and formally modelling extended Taylor rules for interest rate policy formation. Our principal interest is in the second regime (prior to inflation targeting), when the short-term interest rate first became the main monetary policy instrument, with reference to monetary targets and an eclectic set of economic indicators. Policy was opaque in this regime, and has never been studied in the context of rigorous empirical models. Taylor rules, augmented for foreign interest rate influences and interest rate smoothing, and based either on forecast, or actual, inflation and output gap measures, poorly describe the behavior of the discount rate. A satisfactory model includes the deviation of money growth from target in the rule and controls for the extensive financial liberalisation occurring in the period. In practice, the central bank emphasized current inflation, giving a low weight to the output gap. We find weak evidence for structural breaks reflecting competing balance of payments considerations.read more
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Review of Monetary Policy in South Africa Since 1994
Janine Aron,John Muellbauer +1 more
TL;DR: This article reviewed the design and performance of monetary policy in South Africa during 1994-2004 and found that monetary policy decisions taken in response to external and domestic shocks under inflation targeting have significantly improved relative to the preceding framework, though data quality has been a constraint.
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Interest Rate Effects on Output: Evidence from a GDP Forecasting Model for South Africa
TL;DR: In this paper, the authors present a forecasting model for output in South Africa with a four-quarter forecast horizon and a stochastic trend measure underlying shifts in productivity and other supply side trends, including the effects of high real interest rates, which significantly constrained growth in the 1990s, and significant potential growth benefits from fiscal discipline.
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How does Fiscal Policy Affect Monetary Policy in Emerging Market Countries
TL;DR: In this paper, the authors analyze how fiscal policy affects monetary policy in emerging economies and find that the evidence points clearly to a regime of fiscal dominance in the case of Argentina and Brazil during the 1990s and early 2000s.
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Financial Liberalization, Consumption and Debt in South Africa.*
Janine Aron,John Muellbauer +1 more
TL;DR: In this article, the role of financial liberalization in South Africa's low saving rate is discussed, which is of interest for two reasons: the first is that unlike the UK, Scandinavia, Mexico and other countries, South Africa experienced substantial rises in the ratios of consumption and household debt to income from 1983, for which conventional explanations in terms of income, income expectations, interest rates and wealth prove inadequate.
References
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Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more
TL;DR: In this article, the limit distributions of the estimator of p and of the regression t test are derived under the assumption that p = ± 1, where p is a fixed constant and t is a sequence of independent normal random variables.
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Discretion versus policy rules in practice
TL;DR: In this article, the authors examine how recent econometric policy evaluation research on monetary policy rules can be applied in a practical policymaking environment, and the discussion centers around a hypothetical but representative policy rule much like that advocated in recent research.
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Econometric policy evaluation: A critique
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Critical values for cointegration tests
TL;DR: In this article, the results of the simulation experiments are summarized by means of response surface regressions in which critical values depend on the sample size and can be read off directly, and critical values for any finite sample size can easily be computed with a hand calculator.
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Monetary Policy Rules in Practice: Some International Evidence
TL;DR: This paper found that since 1979 each of the G3 central banks has pursued an implicit form of inflation targeting, which may account for the broad success of monetary policy in those countries over this time period.