Monetary Policy, Commercial Banking and the Political Imperative, 1965–85

Katherine Munro

Chapter 7 in Banking and Business in South Africa, 1988, pp 113-132 from Palgrave Macmillan

Abstract: Abstract This paper focuses on the relationship between monetary policy, economic and political conditions, and commercial banking functions and practices in South Africa over the period 1965 to 1985. Changes in banking functions have been numerous and have occurred at a rapid rate, but these changes have not been solely the result of market forces. Instead monetary policy distorted market forces significantly because monetary policy over the period considered was not politically neutral. Thus the shape of commercial banking was a response to and a reaction against monetary policy and distortions in market forces. Frequently the consequences of an active interventionist monetary policy have been undesirable and unforeseen. Over the years, the difficulties arising from interference in the market place for money have been perceived by the bankers and monetary authorities and the debate on the role of monetary policy has been vigorous. Discussion has focused on whether the principal target of monetary policy should be the quantity or the cost of money, how the supply of money can be controlled and at an even more basic level, who is responsible for monetary creation. In recent years, official thinking has shown a greater awareness of the importance of the market, and now considers that policy changes are more likely to succeed when attempted through and via the market, if market conditions are normal.

Keywords: Monetary Policy; Commercial Bank; Money Supply; Banking Sector; Monetary Authority (search for similar items in EconPapers)
Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-09632-9_7

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DOI: 10.1007/978-1-349-09632-9_7

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