Africana Periodical Literature 
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 Periodical article |
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| Title: | The South African Reserve Bank and the rate of interest |
| Author: | Botha, D.J.J. |
| Year: | 1997 |
| Periodical: | South African Journal of Economics |
| Volume: | 65 |
| Issue: | 4 |
| Pages: | 532-567 |
| Language: | English |
| Geographic term: | South Africa |
| Subjects: | central banks inflation interest rates |
| External link: | https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.1997.tb01379.x/pdf |
| Abstract: | For almost a quarter of a century the South African public has suffered from an inflation (around 15 percent) which at least in countries of the developed world would have been regarded as unacceptably high. Only during the past year or two has inflation shown signs of decreasing marginally below 10 percent. Top officials in the country have hailed this as a triumph of the monetary policy pursued by the Reserve Bank. It has been interpreted by some as proof of the eventual success of the policy of fighting inflation by keeping interest rates high. This paper discusses the Bank's anti-inflation policy, especially since the 1980s. It shows that this policy, far from alleviating inflation, has in effect exacerbated it. Statistical evidence proves the ineffectiveness of the Bank's anti-inflation policy. The consumer price index over the period 1970-1995 shows that there was never a slowdown, let alone an absolute drop, in prices over these years. Statistical evidence also shows that the money supply is fundamentally unrelated to the level of the rate of interest. The conclusion is that the Bank's policy of high and rising interest rates causes a transfer of wealth from the lower and middle-income groups to the much more well-off financial sector. Notes, ref. |
