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Journal of African Economies Advance Access originally published online on September 5, 2007
Journal of African Economies 2007 16(5):705-744; doi:10.1093/jae/ejm013
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Right arrow E31 - Price Level; Inflation; Deflation
Right arrow E43 - Determination of Interest Rates; Term Structure of Interest Rates
Right arrow E52 - Monetary Policy (Targets, Instruments, and Effects)
Right arrow E58 - Central Banks and Their Policies
Right arrow O11 - Macroeconomic Analyses of Economic Development
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© The author 2007. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Review of Monetary Policy in South Africa since 1994

Janine Arona,* and John Muellbauerb

1 Department of Economics, Oxford
2 Nuffield College, Oxford

* Corresponding author: Janine Aron, Centre for the Study of African Economies, Department of Economics, Oxford University, Oxford, UK.

This paper reviews the design and performance of monetary policy in South Africa since 1994. Quantitative indexes of transparency reveal a strong rise in the transparency and accountability of monetary policy between 1994 and 2004. Inflation and interest rate expectations data and forward interest rate data are used to demonstrate the increased credibility and reasonable predictability of monetary policy since adopting inflation targeting in 2000. The South African Reserve Bank's view on monetary policy transmission channels is discussed, and its recent forecasting performance is evaluated. We find that monetary policy decisions taken in response to external and domestic shocks under inflation targeting have significantly improved relative to the preceding framework, though data quality has been a constraint. Further, inflation targeting has not disadvantaged potential investment in terms of the level of tax-adjusted real interest rates, while inflation has been in the target range since 2003. Finally, the important role for complementary policies to support monetary policy is motivated.

JEL classification: E52, E58


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 J Afr EconHome page
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J. Afr. Econ., November 1, 2007; 16(5): 668 - 704.
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