A recent working paper from the SA-TIED programme’s body of new research has been featured in the largest business weekly in South Africa. The Financial Mail’s feature is headlined: “Reserve Bank vindicated — the critics are wrong; the bank is no ‘inflation nutter’”.
According to the article, SA-TIED Working Paper #7 — 'Identifying monetary policy rules in South Africa', has important findings for recent public debates over whether or not to change the mandate of South Africa’s central bank. Currently, the South African Reserve Bank (SARB) has a single mandate to contain inflation and maintain price stability. Some other countries have adopted a dual-mandate for their central bank, that officially adds employment and growth targets to the monetary authority's policy goals.
As the Financial Mail writes, “Critics have been pushing hard for the Reserve Bank’s mandate to be broadened to make it consider growth and employment concerns directly, not just inflation. But according to new ground-breaking research, the Bank already does so.”
In their paper, SA-TIED researchers Laurence Harris, who co-leads the work stream on Macroeconomic modelling for policy formulation, and Shannon Bold try to measure the extent to which the SARB’s policy rate decisions have followed a Taylor rule crafting policy rules that respond to changes in employment and growth indicators while maintaining the focus on inflation.
In his interview with the Financial Mail, Prof. Harris indicated that the findings do not agree with “criticism of the Bank as an inflexible, inflation nutter.” Instead, he says, “These estimates robustly support the idea that the Reserve Bank has used inflation targeting with considerable regard to labour market conditions.”
Read the full article at the Financial Mail.