Gupta, RanganKabundi, AlainModise, Mampho P.2010-05-282010-05-282010-01Gupta, R, Kabundi, A & Modise, MP 2010, 'Has the SARB become more effective post inflation targeting?', Physical Chemistry Chemical Physics, doi: 10.1007/s10644-009-9083-7. [http://www.rsc.org/publishing/journals/cp/Index.asp]1359-734510.1007/s10644-009-9083-7http://hdl.handle.net/2263/14140This paper assesses the impact of a monetary policy shock on 15 key macroeconomic variables of South Africa, in the pre- and post-inflation targeting periods. For this purpose, we use a Factor-Augmented Vector Autoregressive (FAVAR) model comprising of 107 monthly time series over two equal sub-samples of 1989:01–1997:12 and 2000:01–2008:12. The results, based on impulse response functions, are in line with economic theory and indicate no puzzling effects often observed with small-scale monetary Vector Autoregressive (VAR) models. More importantly, we find that the ability of monetary policy in affecting key macroeconomic variables, including inflation, has increased in the post-targeting period. But, majority of the effects are insignificant, which could, however, also be due to the shorter-lengths of the sub-samples relative to the number of variables used in this study, rather than depicting the inability of monetary policy to significantly affect the South African economy.enSpringer. The original publication is available at www.springerlink.comMonetary policy shockInflation targetingImpulse responseFactor augmented vector autoregression (FAVAR)Monetary policy -- South Africa -- Mathematical modelsInflation (Finance) -- South Africa -- Mathematical modelsMacroeconomics -- Econometric modelsPostprint Article