Is the Impact of High Monetary Policy Credibility on Consumer Price Inflation and the ERPT Reinforced by Fiscal Policy Credibility?

  • Eliphas Ndou
  • Nombulelo Gumata
  • Mthokozisi Mncedisi Tshuma


Evidence shows that the exchange rate appreciation, inflation and inflation expectations decline are larger due to persistently rising fiscal policy and monetary policy credibility shocks compared to the non-persistent shocks. In addition, we establish that strong fiscal policy credibility reinforces the effects of monetary policy credibility shocks leading to a larger exchange rate appreciation, larger declines in inflation outcomes and inflation expectations. Thus, we conclude that strong fiscal policy credibility reinforces the monetary policy credibility effects on the exchange rate, inflation outcomes and inflation expectations in achieving the price stability mandate. Thus, the persistence of monetary policy credibility shock matters for the exchange rate, inflation outcomes and inflation expectations.


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© The Author(s) 2019

Authors and Affiliations

  • Eliphas Ndou
    • 1
  • Nombulelo Gumata
    • 2
  • Mthokozisi Mncedisi Tshuma
    • 3
  1. 1.South African Reserve BankPretoriaSouth Africa
  2. 2.PretoriaSouth Africa
  3. 3.National Planning Commission SecretariatPretoriaSouth Africa

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