Central Banks and Their Policies
The paper investigates the effects of South African monetary policy implementation on selected macroeconomic variables in the rest of the Common Monetary Area (CMA) looking specifically at the response of a shock to South African key interest rate (repo rate) on macroeconomic variables such as the regional lending rates, interest rate spread, private sector credit, money supply, inflation and economic growth in the rest of the CMA countries. The analysis is conducted using impulse-response functions derived from Panel Vector Autoregression (PVAR) methodology.
Counter-cyclical capital buffers are increasingly popular new "macroprudential" tools. However, there is limited empirical evidence on both the intended and unintended consequences of using these buffers. During the pre-crisis period (2002--2007), South Africa increased capital adequacy ratios to curb rapid credit extension, and so provides a useful test case. Using a new data set from that period, this paper extends a standard large-scale macroeconomic model to include capital adequacy ratios as a policy lever.
Although the title seems to be a contradictio in terminis, this paper shows that there are a small eclectic number of central banks with private shareholders. This paper reviews this selected group of central banks on which surprisingly little has been published. The first challenge is to identify these central banks, as no “generally accepted” or standardised list of such central banks exists, and very little has been published that identifies or compares them.
This paper develops a dynamic general equilibrium model with endogenous default on entrepreneur loans and funds borrowed from the central bank (liquidity injections) and investigates the welfare cost of sovereign default. The results show that sovereign default affects production through households' investment decisions and the bank's asset portfolio adjustment. The effect of sovereign default on entrepreneurs tends to be in favor of production. Sovereign default reduces the variability of the output gap and hence the welfare loss.
This paper examines the relationship between ination and ination expectations of analysts, business, and trade unions in South Africa during the inflation targeting (IT) regime. We consider inflation expectations based on the Bureau of Economic Research (BER) quarterly survey observed from 2000Q1 to 2013Q1. We estimate ination expectations of individual agents as the weighted average of lagged ination and the inflation target. The results indicate that expectations are heterogeneous across agents.
In 1967 Milton Friedman delivered “The Role of Monetary Policy’ as his presidential address to the American Economic Association (AEA). In its published version – Friedman (1968) – it has become, arguably, the most influential paper in modern monetary economics and was recently included in the AEA’s list of the twenty most influential papers published in the first century of the American Economic Review. But the influence of Friedman’s address is based on an interpretation that seriously distorts the content of his main argument.
A nominal income target may provide credibility to a commitment to keep real interest rates exceptionally low, until a target output level is reached -even if expected inflation rises in the interim- in economies where nominal interest rates are effectively at the zero lower bound, which is not the South African case. There are practical difficulties with adopting nominal income targeting as the monetary policy framework. These include issues on the choice of a target level, risk of unanchored ination expectations, and increased likelihood of error due to data uncertainty and revisions.