Financial assets, linear and nonlinear policy rules : an in-sample assessment of the reaction function of the South African Reserve Bank

dc.contributor.authorKasai, Ndahiriwe
dc.contributor.authorNaraidoo, Ruthira
dc.contributor.emailruthira.naraidoo@up.ac.zaen_US
dc.date.accessioned2012-10-22T06:50:00Z
dc.date.available2012-10-22T06:50:00Z
dc.date.issued2012
dc.description.abstractPURPOSE – The purpose of this paper is to investigate how the South African Reverse Bank (SARB) sets monetary policy rate. DESIGN/METHODOLOGY/APPROACH – Given the controversial debate on whether central banks should target asset prices for economic stability, the authors analyse whether the SARB policy-makers pay close attention to asset and financial markets in its policy decisions in the context of both linear and nonlinear Taylor type rule models of monetary policy. FINDINGS – The main findings are that the nonlinear Taylor rule provides the best description of in-sample SARB interest rate setting behaviour as the financial crisis unfolds. The SARB policy-makers pay close attention to the financial conditions index when setting interest rates. The SARB’s response of monetary policy to inflation is greater during business cycle recessions with not much weight on output and seems to place high importance on inflationary pressures of output during boom periods. The 2007-2009 financial crisis witnesses and overall decreased reaction to inflation, output and financial conditions amidst increased economic uncertainty. ORIGINALITY/VALUE – This paper introduces a financial condition index into a Taylor monetary policy rule and examines whether nonlinear models can provide additional information over a linear model.en_US
dc.description.urihttp://www.emeraldinsight.com/0144-3585.htmen_US
dc.identifier.citationKasai, N & Naraidoo, R 2012, 'Financial assets, linear and nonlinear policy rules : an in-sample assessment of the reaction function of the South African Reserve Bank', Journal of Economic Studies, vol. 39, no. 2, pp. 161-177.en_US
dc.identifier.issn0144-3585 (print)
dc.identifier.issn1758-7387 (online)
dc.identifier.other10.1108/01443581211222644
dc.identifier.urihttp://hdl.handle.net/2263/20248
dc.language.isoenen_US
dc.publisherEmeralden_US
dc.rights© Emerald Group Publishing Limiteden_US
dc.subjectMonetary policyen_US
dc.subjectNonlinearityen_US
dc.subjectFinancial conditions indexen_US
dc.subjectEconomic policyen_US
dc.subjectSouth African Reserve Bank (SARB)en_US
dc.titleFinancial assets, linear and nonlinear policy rules : an in-sample assessment of the reaction function of the South African Reserve Banken_US
dc.typePostprint Articleen_US

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