High Frequency Identification is the leading approach to study monetary policy effects, yet this has only been done in advanced economies such as the USA, countries in the Euro Area and the UK.
With a lack of evidence on Monetary Policy in emerging economies, this paper conducts a high frequency identification of monetary policy in South Africa, a small open economy with modern central banking and liquid and developed financial markets.
This paper captures the effect of Monetary Policy announcements with 3 factors: short-term (conventional) monetary surprises; and two ‘communication surprises’ to medium- and long-maturities. It also studies the transmission of monetary policy using both an event study approach and an IV-SVAR.
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