The Opportunistic approach to monetary policy and financial markets

Ndahiriwe Kasai and Ruthira Naraidoo

No 201103, Working Papers from University of Pretoria, Department of Economics

Abstract: We test the concept of the Opportunistic Approach to monetary policy in South Africa post 2000 inflation targeting regime. Our findings support the two features of the opportunistic approach. First, we find that the models that include an intermediate target that reflects the recent history of inflation rather than simple inflation target improve the fit of the models. Second, the data supports the view that the South African Reserve Bank (SARB) behaves with some degree of nonresponsiveness when inflation is within the zone of discretion but react aggressively otherwise. Recursive estimates from our preferred model reveal that overall there has been a subdued reaction to inflation, output and financial conditions amidst the increased economic uncertainty of the 2007- 2009 financial crisis.

Keywords: monetary policy; opportunistic approach; intermediate inflation; financial conditions (search for similar items in EconPapers)
JEL-codes: C51 C52 C53 E52 E58 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011-02
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 (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201103

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