Forward-Looking Monetary Policy Reaction Functions for South Africa

Irrshad Kaseeram ()
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Irrshad Kaseeram: University of Zululand

The African Finance Journal, 2010, vol. 12, issue Conference Issue, 98-109

Abstract: This paper analyses the interes-rate decision-making behaviour of the South African Reserve Bank (SARB) since the of the adoption of the Inflation Targeting Monetary Policy Framework (ITMPF)1. The general method of moments (GMM) technique is used to model hybrid Taylor type rules, employing monthly revised data from the period January 2000 to February 2008. This study successfully demonstrates that policy responses are best described by a closed-economy reaction function that incorporates twelve months ahead-expected inflation together with the output gap. However, an open economy specification that includes deviations of real effective exchange rates from its reference value also gives plausible results.

JEL-codes: C22 E31 E52 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journl:v:12:y:2010:i:conference:p:98-109

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