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Trouble Every Day: Monetary Policy in an Open Emerging Economy

Author

Listed:
  • Ekaterina Pirozhkova

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, University of Pretoria [South Africa])

  • Giovanni Ricco

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique - IP Paris - Institut Polytechnique de Paris, University of Warwick [Coventry], OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Nicola Viegi

    (University of Pretoria [South Africa])

Abstract

Four factors drive the high-frequency impact of monetary policy announcements in South Africa: affecting short-, mid-, and long-term yield curve, as well as country risk. Controlling for information effects, we build IVs to study the transmission of conventional monetary policy, forward guidance, term premia, country risk and information shocks. Our findings reveal textbook contractionary effects of conventional monetary policy. Policy communication, particularly forward guidance, has persistent effects on output and prices. Country risk is a novel and powerful channel of monetary policy communication in emerging markets. By defending its independence, re-stating its inflation target objective, and addressing external shocks, the central bank can mitigate country risk and generate strong expansionary effects.

Suggested Citation

  • Ekaterina Pirozhkova & Giovanni Ricco & Nicola Viegi, 2024. "Trouble Every Day: Monetary Policy in an Open Emerging Economy," Working Papers hal-04892065, HAL.
    • Handle: RePEc:hal:wpaper:hal-04892065
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-04892065v1
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    Cited by:

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    2. Rodrigo Sekkel & Henry Stern & Xu Zhang, 2025. "Money Talks: How Foreign and Domestic Monetary Policy Communications Move Financial Markets," Staff Working Papers 25-33, Bank of Canada.

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    Keywords

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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