Money channel of monetary policy transmission in Namibia
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Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
The Institute for International Economics
Abstract
There is an argument that being in an exchange rate pegging arrangement limits the scope of
using interest rate to control money supply to affect output or inflation but here is a point of
contention in the case of Namibia. This is due to the fact that the major concern in an exchange
rate pegging arrangement is that it obliges the central bank (BoN) to limit money creation to
levels comparable to those of the anchor country (South Africa), to which the Namibia dollar is
pegged. This is because the process of money creation is associated with increase in domestic
inflation pressures. This study includes four variables: real output; consumer price level;
aggregate money supply; and repo rate, in the structural vector error correction (SVECM)
model, to analyse the money channel for monetary policy transmission in Namibia. The model
estimated utilised quarterly time-series data covering the period 2000:Q1 to 2016:Q4. The
results show that money supply contains information on the monetary policy transmission
process, but, there are more factors involved in the responses of output to the repo rate shocks
than consumer prices alone.
Description
Keywords
Structural vector error correction, Exchange rate pegging, Money, Monetary policy, Namibia
Citation
Sheefeni, J. P.S. (2020). Money channel of monetary policy transmission in Namibia. ECONOMIA INTERNAZIONALE / INTERNATIONAL ECONOMICS, 73(1),131-150