A computable general equilibrium model of the monetary policy implications for financial stability in South Africa

Conrad Beyers, Kojo A. Essel‐Mensah and Dimitrios P. Tsomocos

South African Journal of Economics, 2024, vol. 92, issue 4, 415-443

Abstract: The South African Reserve Bank (SARB) uses interest rates to control inflation. The Computable General Equilibrium (CGE) model can contribute to inflation targeting objective and also determine the effects on banks and the economy. We improved the accuracy of the results from previous work on the banking sector CGE model by estimating the elasticities of the reduced form equations of the model instead of arbitrarily choosing them. Our results conform with the established view that lower policy rates lead to an increase in inflation and a reduction in banks' profits. However, because of the adverse supply shocks arising from the effects of the COVID‐19 pandemic, the increase in the GDP is crowded out. The CGE model is a useful tool for the SARB for monetary policy implications on financial stability, informing and providing analysis on its repo rate decision, and determining the consequent effects on the economy.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/saje.12383

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:92:y:2024:i:4:p:415-443

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0038-2280

Access Statistics for this article

South African Journal of Economics is currently edited by Philip A. Black

More articles in South African Journal of Economics from Economic Society of South Africa Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().