Journal article

Monetary policy reaction function through extended Tailor's Rule


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Publication Details

Author list: Motlaleng, Gaotlhobogwe
Tshekega, Manyabeza

Publication year: 2008

Journal: Botswana Institute of Administration & Commerce

Volume number: 5

Issue number: 1

Start page: 32

End page: 47

Number of pages: 16

URL: https://journals.co.za/doi/epdf/10.10520/AJA17291070_18



This paper examined the Bank of Botswana's monetary policy reaction function (MPRF) using the extended Taylor's rule, the VECM and the impulse response functions. We found that the Bank rate responds positively to a shock to the inflation gap and output gap. This confirms that the Bank of Botswana is committed to attaining price stability. This finding suggests that the Bank of Botswana priority is on targeting inflation than output. Also, Bank of Botswana considers the South African interest rate in setting the domestic interest rate.


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