How Independent are the South African Reserve Bank’s Monetary Policy Decisions? Evidence from a Global New-Keynesian DSGE Model

Annari De Waal, Rangan Gupta and Charl Jooste

No 201525, Working Papers from University of Pretoria, Department of Economics

Abstract: We study the response of South African monetary policy decisions to foreign monetary policy shocks. We estimate the extent of foreign monetary policy pass-through by augmenting standard Taylor rules and comparing the results within the context of a Global New-Keynesian Dynamic Stochastic General Equilibirum (DSGE) model. The general equilibrium model captures important spill-over effects that would otherwise have been ignored in a single equation setup. The results show that the relationship between foreign monetary policy shocks and South African interest rates is complicated - South Africa does not import foreign monetary policy directly, but is still affected. Except for the U.S. an increase in foreign interest rates lead to a decrease in South African interest rates - highlighting the complex channels that monetary policy authorities have to monitor outside of its economy.

Keywords: Monetary policy; Contagion; Global New-Keynesian DSGE model (search for similar items in EconPapers)
JEL-codes: C20 C30 E43 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2015-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201525

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