GDP Growth Threshold and Non-linear Effects of Repo Rate Shocks

  • Eliphas Ndou
  • Nombulelo Gumata


The analysis in this chapter shows the asymmetric effects of the policy rate subject to the GDP growth threshold. A GDP growth threshold bounded between 2.3 and 2.4 per cent was established. Evidence suggests that the repo rate exerts significantly different effects between GDP growth regimes. A contractionary monetary policy shock generates a larger reduction in GDP growth than an expansionary shock. Credit frictions play a role during periods of low economic growth and monetary policy affects interest rates and the external finance premium. This means that the effects of contractionary monetary policy are accentuated, suggesting that credit constraints are binding in the low growth regime and therefore play an even more important role as drivers of output growth. In policy terms, the results set out in the chapter show that in low GDP growth regimes a gradual pace of policy tightening both in terms of magnitudes may be an appropriate approach to reinforcing the price stability mandate.


Monetary Policy Growth Regime Credit Constraint Rate Shock Monetary Policy Shock 
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© The Author(s) 2017

Authors and Affiliations

  • Eliphas Ndou
    • 1
  • Nombulelo Gumata
    • 1
  1. 1.South African Reserve BankPretoriaSouth Africa

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