Effects of Monetary Policy on Output

We will investigate the effects of an unanticipated contractionary monetary policy shock on output in South Africa. Certain economic theories suggest that only an unexpected monetary policy response has real impact, and could magnify the impact of systematic response. In this context, a change in monetary policy that comes as no surprise to private economic agents (such as investors, firms and consumers) would not change their expectations and would exert little, if any, effect on output. However, a policy change that has not been anticipated and that is expected to be long-term influences the expectations of future interest rates and economic activities such as investment and the stock market, which influence the future output (Blanchard 2006). These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.