Contents of the volume

2020, Volume 73 - Issue 1

ISSN: 2499-8265
RSS feed citation: At RePEc
Publication date: 04 February 2020

TO EXIT OR NOT TO EXIT (FROM THE EMU)?

Nicola Acocella

Read the article

THE IMPACT OF EXCHANGE RATE VOLATILITY ON THE SECURITY MARKETS IN BRICS ECONOMIES

Pascal Xavier Gnagne, Lumengo Bonga-Bonga

Read the article

THE DETERMINANTS OF IMPORT DEMAND IN SOUTH AFRICA: AN EMPIRICAL INVESTIGATION

Nomfundo P. Vacu, Nicholas M. Odhiambo

Read the article

THE IMPACT OF DOMESTIC AND FOREIGN PUBLIC DEBT ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM ZIMBABWE

Talknice Saungweme, Nicholas M. Odhiambo

Read the article

THE GREAT RECESSION AND THE DETERMINANTS OF TARIFF AND ANTIDUMPING RESTRICTIONS IN ARGENTINA, BRAZIL AND MEXICO: A RETROSPECTIVE STUDY

Alejandro Jacobo, Ileana R. Jalile

Read the article

MONEY CHANNEL OF MONETARY POLICY TRANSMISSION IN NAMIBIA

Johannes Sheefeni

Read the article

ACKNOWLEDGEMENT TO REFEREES

Amedeo Amato

Read the article

Genoa Chamber of Commerce
Economia Internazionale / International Economics

< Back

Corresponding author

Johannes SHEEFENI, Department of Econonomics, University of the Western Cape, Cape Town, South Africa

Money Channel of Monetary Policy Transmission in Namibia

Pages

131-150

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.

JEL classification

E5, E52

Keywords

Structural Vector Error Correction, Exchange Rate Pegging, Money, Monetary Policy, Namibia

Index

  1. Introduction
  2. Literature review
  3. Methodology
  4. Empirical findings and analysis
  5. Conclusion

Bibliography

Alexander, C. (2001), Market Models: A Guide to Financial Data Analysis, John Wiley & Sons Ltd.
BoN, (2008), Namibia’s Monetary Policy Framework, Bank of Namibia: Windhoek. 
Bernanke, B.S. (1986), “Alternative Explanations of the Money-Income Correlation”, [Online] URL: https://www.princeton.edu/~erp/ERParchives/archivepdfs/M321.pdf.
Bernanke, B.S. and A.S. Blinder (1988), “Credit, Money, and Aggregate Demand”, American Economic Review, 78(2), 435-439.
Bernanke, B. and I. Mihov (1995), “Measuring Monetary Policy”, NBER Working Papers 5145. 
Bolnick, B. (1991), “Weak Links in the Monetary Transmission Mechanism: The Case of Malawi”, ODI/HIID Conference on Improving Monetary Policy in Africa and Asia.
Dabla-Norris, E. and H. Floerkemeier (2006), “Transmission Mechanisms of Monetary Policy in Armenia: Evidence from VAR Analysis”, IMF Working Paper No. 248.
Bwire, T., F.L. Anguyo and J. Opolot (2013), “A Re-estimation of Exchange Rate Pass-Through to Domestic Prices in Uganda: Evidence from a Structural Vector Autoregression (SVAR)”, Bank of Uganda Working Paper No. 05.
Elias, S. and M. Kulish (2010), “Direct Effects of Money on Aggregate Demand: Another Look at the Evidence”, Reserve Bank of Australia Research Discussion Paper No. 05.
Enders, W. (2004), Applied Econometric Time Series, 2nd edition, John Wiley & Sons Inc.: Hoboken.
Favero, C.A. (2001), Applied Macroeconometrics, Oxford University Press.
Friedman, M. (1988), “Money and the Stock Market”, Journal of Political Economy, 96(2), 221-245.
Funda, M.C. (2014), “An Investigation of the Effectiveness of the Interest Rate Channel of Monetary Policy Transmission Mechanism in Zambia”, Unpublished Masters Thesis, University of Namibia.
Gujarati, D.N. (1995), Basic Econometrics, McGraw-Hill: New York. 
Jayaraman, T.K. and C-K. Choong (2008), “Monetary Policy Transmission Mechanism in Fiji: An Empirical Analysis of the Quarterly Model”, International Journal of Business and Management, 3(11), 11-26.
Kalenga, P. (2001), “Monetary Policy Framework in Namibia”, Occasional Paper, Bank of Namibia.
McCoy, D. (1997), “How Useful is Structural VAR Analysis for Irish economics”, Central Bank of Ireland Research Technical Papers, 2/RT/97.
Meltzer, A.H. (1995), “Money Credit and (other) Transmission Processes: A Monetarist Perspective”, Journal of Economic Perspective, 9(4), 44-72.
Mishkin, F.S. (2001), “The Transmission Mechanism and the Role of Asset Prices in Monetary Policy”, National Bureau Economic Research Working Paper No. 8617.
Ngalawa, H.P.E. (2009). “Dynamic Effects of Monetary Policy Shocks in Malawi”, Paper Presented at the 14th Annual Conference of the African Econometric Society, Abuja, Nigeria, 8-10 July.
Pindyck, R.S. and D.L. Rubinfeld (1991), Econometric Models & Economic Forecasts, McGraw-Hill, Inc. International Editions.
Samkharadze, B. (2008), “Monetary Transmission Mechanism in Georgia: Analyzing Pass-Through of Different Channels”, Center for Operations Research and Econometrics (CORE), Belgium.
Saxena, S.C. (2008), Capital Flows, Exchange Rate Regime and Monetary Policy, BIS Papers Chapters, in: Bank for International Settlements (Ed.), “Transmission Mechanisms for Monetary Policy in Emerging Market Economies”, Volume 35, pages 81-102, Bank for International Settlements. 
Sheefeni, J.P.S. (2013), “Monetary Policy Transmission in Namibia, 1993 – 2011”, PhD Thesis, Nelson Mandela Metropolitan University.
Sims, C. (1986), “Are Forecasting Models Usable for Policy Analysis?”, Federal Reserve Bank of Minneapolis, Quarterly Review, 10(1), 2-16.
Sims, C.A. and T.A. Zha (1998), “Does Monetary Policy Generate Recessions”, Federal Reserve Bank of Atlanta Working Paper No. 12.
Stock, J. and M. Watson (2001), “Vector Autoregressions”, Journal of Economic Perspectives, 15(4), 101-116.
Uanguta, E. and S. Ikhide (2002), “Monetary Policy Transmission Mechanism in Namibia”, Bank of Namibia Working Paper No. 2.
Vonnák, B. (2005), “Estimating the Effects of Hungarian Monetary Policy within a Structural VAR Framework”, Magyar Nemzeti Bank Working Paper No. 1.