The monetary transmission mechanism in South Africa

Smal, Daleen; Jager, Shaun de

doi:10.4324/9780203324134-15

Cited by 28 publications

(41 citation statements)

References 10 publications

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“…Smal and de Jager (2001) find a transmission lag of a monetary policy shock to inflation in South Africa of about 6-8 quarters.…”

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confidence: 89%

A Bayesian-Estimated Model of Inflation Targeting in South Africa

Harjes¹,

Ricci²

2009

IMF Staff Pap

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This paper estimates a small dynamic macroeconomic model for the South African economy with Bayesian methods. The model is tailored to assessing the impact of domestic as well as external shocks on inflation within an inflationtargeting framework, by incorporating forward-looking behavior of private agents and of the monetary authority. The model is able to display important empirical features of the monetary transmission mechanism that have been found in other studies. It helps to integrate the short-term inflation outlook into a consistent medium-term framework and to design the policy response for various shocks that affect inflation. [JEL E31, E37, E43, E52] IMF Staff Papers (2010) 57, 407-426.

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“…Smal and de Jager (2001) find a transmission lag of a monetary policy shock to inflation in South Africa of about 6-8 quarters.…”

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confidence: 89%

A Bayesian-Estimated Model of Inflation Targeting in South Africa

Harjes¹,

Ricci²

2009

IMF Staff Pap

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“…Monetary policy induced changes to the repo rate have a direct impact on several economic variables including the exchange rate, money and credit, asset prices and decisions on spending and investment. These variables subsequently control the demand and supply dynamics of goods and services markets and essentially, it is the relationship between supply and demand in these markets which causes inflationary pressures to emerge in the economy (Smal and De Jager, 2001). Aron and Muellbauer (2000) and Knedlik (2006) find empirical support for both the interest rate channel and the exchange rate channel in South Africa.…”

Section: Inflation Targeing and The Fisher Effectmentioning

confidence: 99%

“…However, as clearly demonstrated in Knedlik (2006:635), the interest rate channel appears stronger than the exchange rate channel in South Africa., confirming the tradition in most empirical studies of the Fisher effects. In this paper we focus on the interest rate channel, drawing predominantly from Mishkin (2004) and Smal and De Jager (2001). In discussing the interest rate channel, we incorporate the role of expectations about future inflation since monetary policy under inflation targeting is aimed at influencing inflation expectations.…”

Section: Inflation Targeing and The Fisher Effectmentioning

confidence: 99%

“…Smal and de Jager (2001) note that due to the forward looking nature of an inflation‐targeting regime it is imperative that monetary authorities be acutely aware of the time lags between policy action and the impact of this action on the real economy and eventually inflation. They suggest that the monetary policy transmission mechanism can take between 12 and 24 months to impact on inflation in South Africa.…”

Section: Inflation Targeing and The Fisher Effectmentioning

confidence: 99%

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Inflation Targeting and the Fisher Effect in South Africa: An Empirical Investigation

Mitchell-Innes

Aziakpono

Faure

2007

South African J Economics

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The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, "i.e." from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one-to-one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short-run Fisher effect and a long-run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short-run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short-term interest rates and the effects of the monetary transmission mechanism. The long-run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long-term interest rate. This suggests that monetary policy has an influence on the real long-term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework. Copyright (c) 2007 The Authors. Journal compilation (c) 2007 Economic Society of South Africa.

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“…Studies on emerging markets include: India(Al-Mashat, 2003), Thailand(Baqir, 2002), and South Africa(Smal and de Jager 2001). Examples of transition economies include Armenia(Dabla-Norris and Flörkemeier, 2006), Georgia(Bakradze and Billmeier, 2007), and Macedonia(Besimi, Pugh, and Adnett, 2006); seeÉgert and MacDonald (2006) for an overview of MTM issues in transition economies Montiel (1990).…”

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confidence: 99%

The Monetary Transmission Mechanism in Egypt

Al-Mashat¹,

Billmeier²

2008

Review of Middle East Economics and Finance

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This paper examines the monetary transmission mechanism in Egypt against the background of the central bank's intention to shift to inflation targeting. It first describes the changing transmission channels over the last decade. Second, the channels are evaluated in a VAR model. The exchange rate channel plays a strong role in propagating monetary shocks to output and prices. Most other channels (bank lending, asset price) are rather weak. The interest rate channel is underdeveloped but appears to be strengthening since the introduction of the interest corridor in 2005, which bodes well for adopting inflation targeting over the medium term.

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The monetary transmission mechanism in South Africa

Cited by 28 publications

References 10 publications

A Bayesian-Estimated Model of Inflation Targeting in South Africa

A Bayesian-Estimated Model of Inflation Targeting in South Africa

Inflation Targeting and the Fisher Effect in South Africa: An Empirical Investigation

The Monetary Transmission Mechanism in Egypt

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