Monetary policy developments and the minerals industry

Raputsoane, Leroi (2024): Monetary policy developments and the minerals industry.

Abstract

This study analyses the reaction of the minerals industry to monetary policy developments in South Africa. This is achieved using a Taylor rule type central bank monetary policy reaction function, where the total, or economy wide, output is substituted with output of the minerals industry. The reaction of the minerals industry to monetary developments is then compared to the standard monetary policy reaction function with economy wide output. The results show that, following an increase in monetary policy interest rate, output of the minerals industry begins to decrease after 4 months and bottoms out after 8 months, following which it progressively increases and gradually tends towards its equilibrium, or steady state, level. Output of the minerals industry only becomes statistically significant after 6 months and remains statistically significant up to 15 months following the surprise increase in the central bank monetary policy interest rate. The study, therefore, concludes that the central bank monetary policy interest rate has an important role in management and stabilisation of economic activity and the minerals industry.

• Item Type: MPRA Paper
• Language: English
• Keywords: Monetary policy, Minerals industry, Economic cycles
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L72 - Mining, Extraction, and Refining: Other Nonrenewable Resources

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