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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Capital controls, two-tiered exchange rate systems and exchange rate policy: the South African experience
Author:Schaling, EricISNI
Year:2009
Periodical:South African Journal of Economics
Volume:77
Issue:4
Pages:505-530
Language:English
Geographic term:South Africa
Subjects:monetary policy
financial market
exchange rates
foreign exchange
capital movements
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2009.01227.x/pdf
Abstract:South Africa's 40 years of experience with capital controls on residents and non-residents (1961-2001) reads like a collection of examples of perverse unanticipated effects of legislation and regulation. The author shows that the presence of capital controls on residents and non-residents enabled the South African Reserve Bank to target domestic interest rates (and or the exchange rate) via interventions in the (commercial) foreign exchange market. This provides an early rationale for anchoring South African monetary policy via the exchange rate, rather than via domestic interest rates. This suggests not only that the capital controls themselves exhibited substantial institutional inertia, but that this same institutional inertia also applied to the monetary policy regime. A plausible reason for this is that for most of the 20th century in South Africa (partial) capital controls and exchange rate-based monetary policies were like Siamese twins - almost impossible to separate. Bibliogr., notes, ref., sum. [Journal abstract]
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