Effectiveness of monetary policy transmission mechanism: the case of selected SADC countries
- Tengwa, Anakho https://orcid.org/0000-0002-0700-8668
- Authors: Tengwa, Anakho https://orcid.org/0000-0002-0700-8668
- Date: 2022-12
- Subjects: Monetary policy -- Africa, Southern , Transmission mechanism (Monetary policy) -- Africa, Southern , Economic development -- Africa, Southern
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/26863 , vital:66037
- Description: Monetary policy plays a significant role in countries economic development. The variability in inflation in the SADC region provides room to question the Effectiveness of the transmission of monetary policy as these countries experience inflation in different ways. The study analyses the effectiveness of monetary policy transmission mechanism on the selected 5 SADC countries, South Africa, Botswana, Mauritius, Tanzania, and Zambia. The selection of the countries was mainly based on data availability. To answer the study hypothesis, the study used secondary data from different data sources, employing the Vector Autoregression Regression. The different channels analysed include the exchange rate, interest rates as well as credit channel to measure monetary policy tools. The main variables are, Gross Domestic Product (GDP), Consumer Price Index (CPI)cpi and money supply. Panel unit root was tested to test the stationarity of the variables and the appropriate lag length was determined. Panel VAR model was estimated where the focus was mainly on variance decomposition and impulse response. Then lastly the stability of the model was tested using diagnostic test. The results revealed that interest rates channel and exchange rate channel have a more significant effect in explaining the transmission of macroeconomic shock to the rest of the economy through gpd and cpi. While the credit channel mostly transmits to the rest of the economy through money supply and cpi, its effects from GDP are rather insignificant. It is also noted that interest rates serve as the dominant channel in transmitting monetary policy shocks to the rest of the economy. When central banks decrease prime lending rates for commercial banks, this is passed to consumers making it less expensive to borrow. In the long run, attracts foreign investors which harms the domestic currency. The author has noted that future research could focus on how asset price channel affects the economy. , Thesis (MCom) -- Faculty of Management and Commerce, 2022
- Full Text:
- Date Issued: 2022-12
- Authors: Tengwa, Anakho https://orcid.org/0000-0002-0700-8668
- Date: 2022-12
- Subjects: Monetary policy -- Africa, Southern , Transmission mechanism (Monetary policy) -- Africa, Southern , Economic development -- Africa, Southern
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/26863 , vital:66037
- Description: Monetary policy plays a significant role in countries economic development. The variability in inflation in the SADC region provides room to question the Effectiveness of the transmission of monetary policy as these countries experience inflation in different ways. The study analyses the effectiveness of monetary policy transmission mechanism on the selected 5 SADC countries, South Africa, Botswana, Mauritius, Tanzania, and Zambia. The selection of the countries was mainly based on data availability. To answer the study hypothesis, the study used secondary data from different data sources, employing the Vector Autoregression Regression. The different channels analysed include the exchange rate, interest rates as well as credit channel to measure monetary policy tools. The main variables are, Gross Domestic Product (GDP), Consumer Price Index (CPI)cpi and money supply. Panel unit root was tested to test the stationarity of the variables and the appropriate lag length was determined. Panel VAR model was estimated where the focus was mainly on variance decomposition and impulse response. Then lastly the stability of the model was tested using diagnostic test. The results revealed that interest rates channel and exchange rate channel have a more significant effect in explaining the transmission of macroeconomic shock to the rest of the economy through gpd and cpi. While the credit channel mostly transmits to the rest of the economy through money supply and cpi, its effects from GDP are rather insignificant. It is also noted that interest rates serve as the dominant channel in transmitting monetary policy shocks to the rest of the economy. When central banks decrease prime lending rates for commercial banks, this is passed to consumers making it less expensive to borrow. In the long run, attracts foreign investors which harms the domestic currency. The author has noted that future research could focus on how asset price channel affects the economy. , Thesis (MCom) -- Faculty of Management and Commerce, 2022
- Full Text:
- Date Issued: 2022-12
Macroeconomic convergence within SADC : implications for the formation of a regional monetary union
- Authors: Johns, Michael Ryan
- Date: 2009
- Subjects: Southern African Development Community , Economic and Monetary Union , Common Monetary Area (Organization) , Economic policy -- Africa, Southern , Monetary policy -- Africa, Southern , Monetary unions , Macroeconomics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1023 , http://hdl.handle.net/10962/d1002758 , Southern African Development Community , Economic and Monetary Union , Common Monetary Area (Organization) , Economic policy -- Africa, Southern , Monetary policy -- Africa, Southern , Monetary unions , Macroeconomics
- Description: Given the growing effect that globalisation and integration has had upon economies and regions, the process of monetary union has become an increasingly topical issue in economic policy debates. This has been driven in part by the experience and successes of the European Monetary Union (EMU), which is widely perceived as beneficial to member countries. The Southern African Development Community (SADC) is an example of a group of countries that has realised that there are benefits that may arise from economic integration. This paper makes use of an interest-rate pass through model to investigate whether the pass-through of monetary policy transmission in ten SADC countries has become more similar between January 1990 and December 2007 using monthly interest rate data. This is done to determine the extent of macroeconomic convergence that prevails within SADC, and consequently establish whether the formation of a regional monetary union is feasible. The results of the empirical pass-through model were robust and show that there are certain countries that have a more efficient and similar monetary transmission process than others. In particular, the countries that form the Common Monetary Area (CMA) and the Southern African Customs Union (SACU) tend to show evidence of convergence in monetary policy transmission, especially since 2000. In addition, from analysis of the long-run pass-through, the results reveal that there is evidence that Malawi and Zambia have shown signs of convergence toward the countries that form the CMA and SACU, in terms of monetary policy transmission. The study concludes that a SADC wide monetary union is currently not feasible based on the evidence provided from the results of the pass-through analysis. Despite this, it can be tentatively suggested that the CMA may be expanded to include Botswana, Malawi and Zambia.
- Full Text:
- Date Issued: 2009
- Authors: Johns, Michael Ryan
- Date: 2009
- Subjects: Southern African Development Community , Economic and Monetary Union , Common Monetary Area (Organization) , Economic policy -- Africa, Southern , Monetary policy -- Africa, Southern , Monetary unions , Macroeconomics
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:1023 , http://hdl.handle.net/10962/d1002758 , Southern African Development Community , Economic and Monetary Union , Common Monetary Area (Organization) , Economic policy -- Africa, Southern , Monetary policy -- Africa, Southern , Monetary unions , Macroeconomics
- Description: Given the growing effect that globalisation and integration has had upon economies and regions, the process of monetary union has become an increasingly topical issue in economic policy debates. This has been driven in part by the experience and successes of the European Monetary Union (EMU), which is widely perceived as beneficial to member countries. The Southern African Development Community (SADC) is an example of a group of countries that has realised that there are benefits that may arise from economic integration. This paper makes use of an interest-rate pass through model to investigate whether the pass-through of monetary policy transmission in ten SADC countries has become more similar between January 1990 and December 2007 using monthly interest rate data. This is done to determine the extent of macroeconomic convergence that prevails within SADC, and consequently establish whether the formation of a regional monetary union is feasible. The results of the empirical pass-through model were robust and show that there are certain countries that have a more efficient and similar monetary transmission process than others. In particular, the countries that form the Common Monetary Area (CMA) and the Southern African Customs Union (SACU) tend to show evidence of convergence in monetary policy transmission, especially since 2000. In addition, from analysis of the long-run pass-through, the results reveal that there is evidence that Malawi and Zambia have shown signs of convergence toward the countries that form the CMA and SACU, in terms of monetary policy transmission. The study concludes that a SADC wide monetary union is currently not feasible based on the evidence provided from the results of the pass-through analysis. Despite this, it can be tentatively suggested that the CMA may be expanded to include Botswana, Malawi and Zambia.
- Full Text:
- Date Issued: 2009
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