The Opportunistic approach to monetary policy and financial markets
We test the concept of the Opportunistic Approach to monetary policy in South Africa post 2000 inflation targeting regime. Our findings support the two features of the opportunistic approach. First, we find that the models that include an intermediate target that reflects the recent history of inflation rather than simple inflation target improve the fit of the models. Second, the data supports the view that the South African Reserve Bank (SARB) behaves with some degree of nonresponsiveness when inflation is within the zone of discretion but react aggressively otherwise. Recursive estimates from our preferred model reveal that overall there has been a subdued reaction to inflation, output and financial conditions amidst the increased economic uncertainty of the 2007- 2009 financial crisis.
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- Gerlach-Kristen Petra, 2004. "Interest-Rate Smoothing: Monetary Policy Inertia or Unobserved Variables?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-19, March.
- Antulio N. Bomfim & Glenn D. Rudebusch, 1997.
"Opportunistic and deliberate disinflation under imperfect credibility,"
Working Papers in Applied Economic Theory
97-07, Federal Reserve Bank of San Francisco.
- Bomfim, Antulio N & Rudebusch, Glenn D, 2000. "Opportunistic and Deliberate Disinflation under Imperfect Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 707-721, November.
- Antulio N. Bomfim & Glenn D. Rudebusch, 1998. "Opportunistic and deliberate disinflation under imperfect credibility," Finance and Economics Discussion Series 1998-01, Board of Governors of the Federal Reserve System (U.S.).
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