Abstract
M.Com. (Econometrics)
The main objective of this study was to formulate and evaluate a set of equations that
adequately represents the South African monetary system. The analytical framework of the
study is based on a theoretical examination of the process of formulating monetary policy.
The main objectives of monetary policy was identified as price stability, a high rate of
economic growth, exchange rate stability and an acceptable balance of payments situation.
The achievement of these goals is dependent on the central bank's choice of target variables
and policy instruments. The monetary system of South Africa was analysed by examining
the various goals, target variables and policy instruments that constitute the South African
Reserve Bank's monetary policy. The nature and impact of the new banking legislation
which was introduced in South Africa on 1 February 1991 when the Deposit-taking
Institutions Act of 1990 came into effect, was also discussed in the study.
As a result of the high level of abstraction of the monetary phenomenon and the dynamic and interdependent nature of monetary policy, econometric and statistical techniques and criteria
were used to evaluate certain aspects of the South African monetary system.