Assessing the effectiveness of the monetary policy instrument during the inflation targeting period in South Africa

Lumengo Bonga-Bonga

MPRA Paper from University Library of Munich, Germany

Abstract: This paper assesses how inflation reacts to monetary policy shocks in South Africa during the inflation targeting period by making use of the structural vector error correction model (SVECM). The results of the impulse response function obtained from the SVECM show that, on average, contractionary monetary policy that intends to curb inflationary pressure has been impotent in South Africa. However, the contractionary monetary policy shocks managed to reduce output. The paper suggests that it is time a dual target, inflation and output, be considered in South Africa to avoid the harm caused on output growth from monetary policy actions related to the constraint of inflation targeting.

Keywords: inflation targeting policy; structural vector error correction model; South Africa (search for similar items in EconPapers)
JEL-codes: C50 E52 E58 (search for similar items in EconPapers)
Date: 2017-01-14
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Assessing the Effectiveness of the Monetary Policy Instrument during the Inflation Targeting Period in South Africa (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:80794

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