IDEAS home Printed from
   My bibliography  Save this article

Impact of South Africa’s Monetary Policy on the LNS Economies


  • Ikhide, Sylvanus

    () (University of Fort Hare)

  • Uanguta, Ebson

    (Bank of Namibia)


The countries in the Common Monetary Area (CMA), South Africa, Lesotho, Namibia and Swaziland, have harmonised their monetary and exchange rate policies in a quasi-monetary union since 1990. Lesotho, Namibia and Swaziland (LNS) have pegged their currencies to the South African Rand thus effectively surrendering monetary policy to the South African reserve bank. The arrangement has resulted in benefits in the form of lower prices, economy on trading costs, and a large increase in trade volume and cross-border financial transactions. However, one cost that has confronted the LNS economies in this monetary arrangement is the loss of independent monetary policy decision-making for stabilisation purposes. This study applies VAR to trace the impact of South Africa Reserve Bank°Øs (SARB) monetary policy on the LNS economies. Specifically, the study examines how a change in the policy instrument of the Reserve Bank of South Africa affects money, credit and level of prices in the LNS economies and consequently assesses the capability of these economies to undertake independent monetary policy. Both the impulse response functions and the cumulated forecast errors show that the lending rates, level of prices and money supply respond instantaneously to changes in the repo rate by the South African reserve bank. Our analysis confirms that the South African repo rate is the relevant policy instrument for these economies as opposed to the LNS countries’ central bank rates. The study concluded that under the existing monetary arrangement, the LNS economies may not be able to undertake independent monetary policy.

Suggested Citation

  • Ikhide, Sylvanus & Uanguta, Ebson, 2010. "Impact of South Africa’s Monetary Policy on the LNS Economies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 324-352.
  • Handle: RePEc:ris:integr:0507

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Monetary Policy; Transmission Mechanism; Monetary Integration;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:integr:0507. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jong-Eun Lee). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.