Capital controls, two-tiered exchange rate systems and exchange rate policy: the South African experience

Eric Schaling ()

No 110, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: South Africa's 40 years of experience with capital controls on residents and non-residents (1961-2001) reads like a collection of examples of perverse unanticipated effects of legislation and regulation. We show that the presence of capital controls on residents and non-residents, enabled the South African Reserve Bank (SARB) to target domestic interest rates (and or the exchange rate) via interventions in the (commercial) foreign exchange market. This provides an early rationale for anchoring SA monetary policy via the exchange rate, rather than via domestic interest rates. This suggests not only that the capital controls themselves exhibited substantial institutional inertia, but that this same institutional inertia also applied to the monetary policy regime. A plausible reason for this is that for most of the 20th century in South Africa (partial) capital controls and exchange rate based monetary policies were like Siamese twins; almost impossible to separate.

Keywords: capital controls; exchange rate mechanism (search for similar items in EconPapers)
JEL-codes: E42 E61 E65 F32 F33 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-ifn, nep-mac and nep-mon
Date: 2005
View list of references View citations in EconPapers

Downloads: (external link)
http://arno.uvt.nl/show.cgi?fid=53841 (application/pdf)

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: http://EconPapers.repec.org/RePEc:dgr:kubcen:2005110

Access Statistics for this paper

More papers in Discussion Paper from Tilburg University, Center for Economic Research
Series data maintained by Corry Stuyts ().