Monetary policy shocks and macroeconomic performance in regionally integrated common monetary area economies.
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Date
2021
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Abstract
The CMA (Common Monetary Area), comprising of South Africa, Lesotho, Eswatini,
and Namibia, has experienced a steady improvement towards economic
restructuring. This is due to recent global developments and economic integration
where countries are coming together to form regional economic integration initiatives
and coordinate their economic policymaking effectively. Just like the CMA countries,
many countries, such as Germany, Spain, Italy, Austria, Greece, Luxembourg, the
Netherlands, Ireland, Portugal, Finland, France, Belgium, Slovenia, Cyprus, Latvia,
Slovakia, Lithuania, Malta, and Estonia, have come together to form a strong
monetary union for the purpose of having a sound and effective monetary policy.This
study traces how a shock or an unanticipated change in the central bank's policy
instrument of South Africa (SA_REPO) affects the selected macroeconomic
variables, such as the Real Gross Domestic Product Growth (RGDP_G), inflation
(INF), money supply (MS), and lending rates (LRATE), in the entire CMA region.
Employing a Panel Structural Vector Autoregressive model (Panel-SVAR) and
annual data from 1980–2019, the findings show that a shock in the South African
repo rate (SA_REPO) significantly affected the macroeconomic variables, such as
RGDP_G, INF,LRATE and MS, in the entire CMA region. The results indicate that a
shock in the South African repo rate is followed by a significant decline in the
economic growth (RGDP_G), a decrease in inflation, a decrease in money supply
and an increase in lending rates in the entire CMA region. The study recommends
that CMA monetary authorities and policymakers need to formulate policies toward
cushioning the effects of unanticipated monetary policy shocks from the anchor
country as well as global shocks.
Description
Masters Degree. University of KwaZulu-Natal, Pietermaritzburg.