Inflation targeting and the Fisher effect in South Africa: An empirical investigation
- Mitchell-Innes, Henry A, Aziakpono, Meshach J, Faure, Alexander P
- Authors: Mitchell-Innes, Henry A , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469786 , vital:77294 , https://doi.org/10.1111/j.1813-6982.2007.00143.x
- Description: The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, i.e. from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one‐to‐one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short‐run Fisher effect and a long‐run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short‐run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short‐term interest rates and the effects of the monetary transmission mechanism. The long‐run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long‐term interest rate. This suggests that monetary policy has an influence on the real long-term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework.
- Full Text:
- Date Issued: 2007
- Authors: Mitchell-Innes, Henry A , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2007
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469786 , vital:77294 , https://doi.org/10.1111/j.1813-6982.2007.00143.x
- Description: The paper analyses the relationship between expected inflation and nominal interest rates during a period of inflation targeting in South Africa, i.e. from 2000 to 2005. Specifically, it investigates the Fisher hypothesis that nominal interest rates move one‐to‐one with expected inflation, leaving the real interest rate unaffected. The analysis distinguishes between a short‐run Fisher effect and a long‐run Fisher effect. Using cointegration and error correction models (for monthly data for the period April 2000 to July 2005), it was found that the short‐run Fisher hypothesis did not hold during the relevant period under the inflation targeting monetary policy framework in South Africa. This is attributed to a combination of the South African Reserve Bank's (SARB) control over short‐term interest rates and the effects of the monetary transmission mechanism. The long‐run Fisher hypothesis could not be confirmed in its strictest form: while changes in inflation expectations move in the same direction as the nominal long‐term interest rate. This suggests that monetary policy has an influence on the real long-term interest rate, which has positive implications for general economic activity, thus confirming the credibility of the inflation targeting framework.
- Full Text:
- Date Issued: 2007
The transmission of monetary policy under the repo system in South Africa: An empirical analysis
- De Angelis, Catherine H, Aziakpono, Meshach J, Faure, Alexander P
- Authors: De Angelis, Catherine H , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2005
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469797 , vital:77295 , https://doi.org/10.1111/j.1813-6982.2005.00045.x
- Description: The study examines the influence of the repo rate on the interbank rate and analyses whether the transmission channels of interest rates have changed since the adjustment to the repo system in September 2001. The paper employs the Granger causality test using the ECM framework. The results suggest that the influence of the repo rate on the interbank rate was stronger before the adjustments to the system were made. The interbank rate and the repo rate were found to “reverse” roles in the period after the adjustments to the system. Our results show that the changes to the repo system in 2001 did not lead to the achievement of the intended transmission channel; instead it was found that the system in place before the changes were made was in fact already achieving the transmission path that the authorities hoped to accomplish by changing the system.
- Full Text:
- Date Issued: 2005
- Authors: De Angelis, Catherine H , Aziakpono, Meshach J , Faure, Alexander P
- Date: 2005
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469797 , vital:77295 , https://doi.org/10.1111/j.1813-6982.2005.00045.x
- Description: The study examines the influence of the repo rate on the interbank rate and analyses whether the transmission channels of interest rates have changed since the adjustment to the repo system in September 2001. The paper employs the Granger causality test using the ECM framework. The results suggest that the influence of the repo rate on the interbank rate was stronger before the adjustments to the system were made. The interbank rate and the repo rate were found to “reverse” roles in the period after the adjustments to the system. Our results show that the changes to the repo system in 2001 did not lead to the achievement of the intended transmission channel; instead it was found that the system in place before the changes were made was in fact already achieving the transmission path that the authorities hoped to accomplish by changing the system.
- Full Text:
- Date Issued: 2005
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