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.
Aristocratic Century: The sinews of power: political
In his excellent book on the Secretaries of State, Mark Thomson offered ‘the paradox of continuing domination of the aristocracy and the simultaneous insignificance of the House of Lords, per se ’. It is true that, by the beginning of the eighteenth century, the supremacy of the House of Commons in financial matters was a wellestablished convention. The claims of the Commons to an undisputed control over money matters, which had been urged before the Civil War, were resumed immediately after the Restoration and a protracted dispute with the House of Lords began. In 1661 the Lords resolved that there were no precedents in history for this new claim by the House of Commons. In 1671, the Commons retorted that taxation ought not to be questioned by the Lords and in 1678 they reiterated that supply was ‘the undoubted and sole right of the Commons’ and ‘ought not to be changed or altered by the House of Lords’. The Lords' attempt in 1692 to assess their own taxes was also abandoned, though they retired under cover of a rather insubstantial smoke-screen that they maintained their power of amendment to be a ‘fundamental, inherent and undoubted right from which their lordships can never depart’. That established, they departed. Geoffrey Holmes quotes a nice example from 1702 when the bishop of Carlisle found himself the only peer answering to a money bill, ‘no other lord in the House regarded what was doing, this being only (pro forma) to preserve a seeming right to dissent from, or amend, any part of a money bill’.