Money Supply and Economic Activity in South Africa – the Relationship Updated To 2011
This paper reconsiders the relationship between measures of money and measures of economic activity in the South African economy and the role of the Reserve Bank in moderating South African economic cycles. By using data for the past twenty years, the earlier analysis is updated and reassessed so that it is possible to see if the fundamental relationships between money, credit and economic activity have changed and whether the role of the Reserve Bank in managing economic activity has become more pivotal and constructive. One important difference noted is that broadly defined money (M3) does better in explaining economic activity between 2000 and 2011 than narrowly defined money. The opposite is true for the earlier sub-periods. The paper utilises a model of the money supply process to explain why the relationship between narrowly and broadly defined money changed after the year 2000 with regulations that encouraged the banks to reduce their demands for cash leading to an increase in the money multiplier. The paper concludes that the ability of the SA Reserve Bank to moderate the money and bank credit cycles, utilising interest rates as the primary instrument of monetary policy, remains as elusive as ever.
WP/10/01- Central bank balance sheet policy in South Africa and its implications for money-market liquidity
Abstract From the introduction of the repurchase-based refinancing system in March 1998, the size of the balance sheet of the South African Reserve Bank (SARB) has increased almost eight times. This balance sheet growth was accompanied by fundamental changes in the structure of assets and liabilities, resulting mainly from the closing out of the oversold forward foreign exchange book of the SARB until 2004, and the accumulation of foreign exchange reserves thereafter. This paper analyses the impact of the management of the balance sheet of the South African Reserve Bank (SARB) on money-market liquidity conditions in the banking sector. It also discusses a number of implications of trends in the SARB’s balance sheet policy, namely the shrinking money-market shortage in real and relative terms, the cost and effectiveness of monetary policy operations, the cost of reserves accumulation, balance sheet implications of alternative funding structures and financial stability considerations relating to the SARB’s balance sheet policy.
Replication and scientific standards in economics a decade later: the impact of JMCB project
Scientific inquiry embodies skepticism. Researchers are trained to scrutinize every result, doubting not only the truth but also the tests of every hypothesis. Research papers in professional journals typically present only summaries of results, however, providing neither the programs nor data that a reader requires fully understanding -- and questioning -- the authors' tests. The Journal of Money, Credit, and Banking project a decade ago was the first attempt by the editor of a major journal to furnish readers with the data and programs used by the journal's authors. The project revealed the futility of proposing that readers obtain data and programs directly from authors, since data often were lost during the long interval between completion of the research and appearance of the published article. The project also established that professional journals were a low cost mechanism for collecting data from authors and distributing it to readers. A decade later, although the JMCB no longer requests data from authors, 2 journals have recently begun collecting such data and distributing it via the Internet.