DEPARTMENT OF ECONOMICS ECONOMICS 244: 2017 MONETARY POLICY

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1 1 DEPARTMENT OF ECONOMICS ECONOMICS 244: 2017 MONETARY POLICY Module presenter: Andrie Schoombee Office: Schumann 518 Telephone: Internal moderator: Prof J Fourie Note: This brochure should be read with the General Information brochure for undergraduate students in Economics (yellow book) distributed in the first semester. A. LANGUAGE OF INSTRUCTION For this module where both Afrikaans and English are used in the same class group, the combination of facilitated learning opportunities is as follows: During each lecture, all information is conveyed at least in English and summaries or emphasis on content are also given in Afrikaans. Questions in Afrikaans and English are, at the least, answered in the language of the question. Students are supported in Afrikaans and English during a combination of appropriate, facilitated learning opportunities (e.g. consultations during office hours, or scheduled tutorials and Practicals). For first-year modules, SU makes simultaneous interpreting available during each lecture. During the second and subsequent years of study, simultaneous interpreting is made available by SU upon request by a faculty, if the needs of the students warrant the service and SU has the resources to provide it. If two weeks have passed with no students making use of the interpreting service, it may be discontinued. B. OVERVIEW, PURPOSE AND OUTCOMES OF THE MODULE Monetary policy is an important leg of macroeconomic stabilisation policy. The latter aims to achieve internal price stability (low inflation), balance of payments equilibrium and exchange rate stability, and income and employment stability over the business cycle. Like in many other countries, monetary policy in South Africa specifically aims to curtail inflation. In the Economics 214 module, inflation and the policies to curb it were studied in the context of different macroeconomic models. The focus now falls on the study of the practical application, rather than a theoretical consideration, of monetary policy and disinflation policies in the South African context.

2 2 After completing this module, students (i) will have a thorough knowledge of a variety of monetary policy instruments and the implementation of monetary policy in South Africa since 2000, and (ii) will be able to express their views on the level of success achieved by the South African monetary authorities taking into consideration the opportunity costs of their decisions. This will assist students to make informed economic decisions in their careers by taking into account the broad monetary and macroeconomic environment and specifically also the implications of contemporary monetary policy views and conduct. Students are expected to work diligently throughout the course. To facilitate this process, tutorial sessions have been scheduled where students will get the opportunity to discuss tutorial answers and to pose further questions. C. MODULE CONTENT 1. MACROECONOMIC POLICY 2. MONETARY POLICY: A broad overview 2.1 Definition and objectives 2.2 The 2008/9 global financial crisis 2.3 Monetary policy since the global financial crisis 2.4 The monetary policy process 3. MONETARY POLICY INSTRUMENTS 3.1 Market-oriented (indirect) instruments 3.2 Non-market-oriented (direct) instruments 3.3 Non-conventional instruments 4. SOUTH AFRICAN MONETARY POLICY: INFLATION TARGETING 4.1 Reasons for the adoption of an inflation targeting monetary regime 4.2 Ultimate objective 4.3 Intermediate objective/target 4.4 Monetary policy instruments 4.5 Operational variable 4.6 Monetary control system 4.7 Evaluation of monetary policy

3 3 D. PRESCRIBED LITERATURE Department of Economics, US (2017). Monetary Policy. Prepared notes. Du Plessis, S (2014). Monetary policy in South Africa since 1994, in Bhorat, H, Hirsch, A, Kanbur, R & Ncube, M (Eds). The Oxford Companion to the Economics of South Africa. Cape Town: Oxford University Press. Laubscher, J (2009). Policy continuity. Part 2: Monetary policy everybody s favourite straw man, Sanlam Economic Commentary, 4 February. Retrieved 12 June 2009 from y+continuity++part+2++monetary+policy++everybodys+favourite+straw+man Kganyago, L (2017). Statement of the Monetary Policy Committee of the South African Reserve Bank. 20 July. South African Reserve Bank (2017). Monetary Policy Review. April. Van der Merwe, E, Mollentze, S, Leshoro, T, Rossouw, J & Vermeulen, C (2014). Monetary Economics (2 nd edition). Cape Town: Oxford University Press, chapter 10.

4 4 DEPARTEMENT EKONOMIE EKONOMIE 244: 2017 MONETêRE BELEID Dosent: Andrie Schoombee Kantoor: Schumann 518 Telefoon: E-pos: Interne moderator: Prof J Fourie Nota: Hierdie inligtingstuk moet saamgelees word met die Algemene Inligtingstuk vir voorgraadse Ekonomie-studente (geelboekie) wat in die eerste semester beskikbaar gestel is. A. TAALSPESIFIKASIE Vir hierdie module waar sowel Afrikaans as Engels in dieselfde klasgroep gebruik word, is die kombinasie van gefasiliteerde leergeleenthede soos volg: Gedurende elke lesing word alle inligting in ten minste Engels oorgedra, en word opsommings of beklemtoning van inhoud ook in Afrikaans voorsien. Vrae in Afrikaans en Engels word ten minste in die taal van die vraag beantwoord. Studente word in Afrikaans en Engels ondersteun gedurende n kombinasie van toepaslike, gefasiliteerde leergeleenthede (byvoorbeeld konsultasies in kantoortyd, of normale geskeduleerde tutoriale en praktika). Vir eerstejaarmodules stel die US gedurende elke lesing intydse tolking beskikbaar. Gedurende die tweede en daaropvolgende studiejare stel die US intydse tolking op versoek van n fakulteit beskikbaar, indien die studente se behoeftes die diens regverdig en die US oor die hulpbronne beskik om dit te voorsien. Indien twee weke verloop sonder dat enige studente van die tolkdiens gebruik maak, kan dit gestaak word. B. OORSIG, DOEL EN UITKOMSTE VAN DIE MODULE Monetêre beleid is 'n belangrike been van makro-ekonomiese stabilisasiebeleid. Laasgenoemde streef na stabiliteit in die binnelandse pryspeil (lae inflasie), betalingsbalansewewig en wisselkoersstabiliteit, en inkome- en indiensname-stabiliteit oor die loop van die konjunktuursiklus (ook bekend as die besigheids- of sakesiklus). In die Suid-Afrikaanse konteks is monetêre beleid, soos ook in vele ander lande, spesifiek daarop toegespits om inflasie aan bande te lê. In die Ekonomie 214 module is die inflasieprobleem en die beleidsoptrede om dit te bekamp in die konteks van verskillende modelle van die makro-ekonomie bestudeer. Die fokus val nou op die bestudering van die praktiese toepassing, eerder as die teoretiese beskouing, van monetêre beleid in inflasiebekamping in die Suid-Afrikaanse konteks.

5 5 Na afhandeling van hierdie module sal studente (i) 'n grondige kennis besit van die werking van 'n verskeidenheid monetêre beleidsinstrumente en die toepassing van monetêre beleid in Suid-Afrika sedert 2000, en (ii) 'n mening kan uitspreek oor die mate van sukses behaal deur die Suid-Afrikaanse monetêre owerhede inaggenome die geleentheidskostes van hul beleidsbesluite. Dit sal studente help om tydens hul loopbane ingeligte ekonomiese besluite te kan neem wat rekening hou met die breë monetêre en makroekonomiese omgewing en spesifiek ook met die implikasies van heersende monetêre beleidstandpunte en - optredes. Daar word van studente verwag om deurentyd op hoogte te bly met die werk. Om hierdie proses te fasiliteer, is tutoriaalperiodes geskeduleer waar studente die geleentheid sal kry om tutoriaalantwoorde te bespreek en verdere vrae te stel. C. MODULE INHOUD 1. MAKRO-EKONOMIESE BELEID 2. MONETÊRE BELEID: 'n Breë oorsig 2.1 Definisie en doelstellings 2.2 Die 2008/9 wêreldwye finansiële krisis 2.3 Monetêre beleid sedert die wêreldwye finansiële krisis 2.4 Die monetêre beleidsproses 3. MONETÊRE BELEIDSINSTRUMENTE 3.1 Markgerigte (indirekte) instrumente 3.2 Nie-markgerigte (direkte) instrumente 3.3 Nie-konvensionele instrumente 4. SUID-AFRIKAANSE MONETÊRE BELEID: INFLASIETEIKENING 4.1 Redes vir die gebruik van n inflasieteikening monetêre regime 4.2 Uiteindelike doelstelling 4.3 Intermediêre doelwit/teiken 4.4 Monetêre beleidsinstrumente 4.5 Operasionele veranderlike 4.6 Monetêre beheerstelsel 4.7 Evaluasie van monetêre beleid

6 6 D. VOORGESKREWE LITERATUUR Departement Ekonomie, US (2017). Monetêre Beleid. Opgestelde aantekeninge. Du Plessis, S (2014). Monetary policy in South Africa since 1994, in Bhorat, H, Hirsch, A, Kanbur, R & Ncube, M (Eds). The Oxford Companion to the Economics of South Africa. Cape Town: Oxford University Press. Laubscher, J (2009). Policy continuity. Part 2: Monetary policy everybody s favourite straw man, Sanlam Economic Commentary, 4 February. Retrieved 12 June 2009 from y+continuity++part+2++monetary+policy++everybodys+favourite+straw+man Kganyago, L (2017). Statement of the Monetary Policy Committee of the South African Reserve Bank. 20 July. South African Reserve Bank (2017). Monetary Policy Review. April. Van der Merwe, E, Mollentze, S, Leshoro, T, Rossouw, J & Vermeulen, C (2014). Monetary Economics (2 nd edition). Cape Town: Oxford University Press, chapter 10.