The impact of a change in monetary policy by means of a monetary macro-econometric model

[摘要] Monetary policy essentially reflects monetary theory. As the financial system is complexand intricate in nature, it becomes virtually impossible to conceive without a theory tosimplify its structure. This simplified structure should ideally be geared towards thegeneration of a transparent financial environment in order to enhance the effectiveness ofmonetary policy initiatives. To this end, a new monetary policy framework was adopted bythe SARB in the year 2000, and is based on achieving a pre-determined inflation target overa specific period of time. The mission of the SARB to protect the value of the domesticcurrency hence remains the primary objective of the monetary authorities, and anyassistance in increasing the transparency of the Bank's monetary policy initiatives will nodoubt increase the overall effectiveness of monetary policy.Inflation basically remains a monetary phenomenon and the rates of growth in domesticmoney supply and bank credit extension are important factors in the new inflation targetingenvironment. Accordingly, the Bank's actions are aimed at adjusting the repo rate toinfluence economic expansion and the demand for credit. It is essentially for this purposethat the monetary macro-econometric model has been estimated in this study, andfurthermore to elucidate the links between the financial and real sectors of the economy.The model has been structured to reflect money demand theory and how the various domestic economic agents interactively react to a monetary policy impulse. Variousalternative monetary policy simulations were performed on the model to determine if themodel was robust, and whether it suitably reflected the intricate links between the variouskey sectors of the economy. The results of the model suggested that it was stable andsuitable for policy simulation purposes, and that the monetary transmission mechanism inSouth Africa is fairly long. In addition, it was found that there was a close relationshipbetween real economic activity and inflation, while the lagged impact on real output growthfrom a hypothetical change in interest rates was approximately one year. The primary objective of the newly adopted inflation targeting framework is to achieve priceand financial market stability over the long-term. As this framework is of a forward-lookingnature, it becomes imperative to realise that monetary policy initiatives taken now, will resultin (or influence) the possible outcome of the future. This process will even more importantlydetermine whether the SARB will achieve its inflation target or not. However, the solepurpose of this study was to develop a model that suitably illustrates the key links in thetransmission mechanism, and not specifically to determine a model geared towardsforecasting the future rate of inflation.The structure and theoretical foundation of the model is not a guarantee for successfulmonetary policy implementation, but its importance in illustrating the links between the keysectors of the economy cannot be denied. This characteristic makes the model a useful toolin the wide arsenal of operational instruments at the Bank's disposal, and in the processinduces an environment in which the monetary policy implementation process becomesmore transparent. Afterall, it is the credibility and transparency of the monetary authoritythat enhances the various stake holders ability to interpret the signalling intentions of thecentral bank, and it is this that ultimately determines the effectiveness of monetary policy.

[发布机构] University of the Free State