Politics and policies: Determinants of South Africa's monetary policy problems in the 1980s

Abstract

ABSTRACT The interim and final reports of the De Kock Commission (Republic of South Africa 1985) brought monetary policy in South Africa closer to the international consensus of the 1980s, where explicit nominal anchors supporting a policy commitment were widely shared principles. A nominal anchor for monetary policy was introduced for the first time in South Africa in 1986. Despite the adoption of a nominal achor, the 1980s were characterized by sustained high inflation and financial instability. This paper assesses the role of politics and policies in the period running up to and following the announcement of a nominal monetary policy anchor for South Africa. It is shown that all politics and policies contributed to financial instability and to sustained inflation in the 1980s.