The Evolution of Labour Market Trends in Lesotho’s Manufacturing Sector: Lessons and Policy Implications
December 26, 2020Monetary Policy Committee (MPC) Statement of the 26th January, 2021
January 26, 2021
PRICE STABILITY is the primary objective of monetary policy in Lesotho. It is pursued through maintenance of the fixed exchange rate regime. For policy design and improvement, it is important to understand how monetary policy decisions affect the real economy. Hence why the objective of this paper is to investigate the channels of monetary policy transmission for Lesotho. Due to data constraints, only three channels (exchange rate, interest rate and credit channels) are investigated using the standard VAR approach. The results show that monetary policy decisions by the South African Reserve Bank are transmitted to interest rates in Lesotho. In addition, the three channels of monetary policy transmission are ineffective in Lesotho.
Keywords: monetary policy, output effect, price effect JEL classification: E31, E32, E52
