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Macroeconomic stability is one of the most important national objectives in any country. However, economies are often subjected to a number of shocks (internal and external), which can be destabilising, produce volatility and make it difficult to achieve and maintain economic stability. Consequently, various policies are used to help deal with the various shocks that may affect the economy. Of all the available policies, monetary policy appears to have been ever more at the centre of macroeconomic policymaking. Meanwhile, for monetary policy to be effective, there is a need for a better understanding of the transmission mechanism, i.e., the process through which monetary policy decisions are transmitted into changes in real output and inflation. Whereas extensive research on the transmission mechanism has been conducted in developed countries, such work in developing countries, especially in Africa is lacking. This could be due to the fact that it was not long time ago, around the 1990s that countries in Africa started adopting the more modem central bank operations in a market-based economic and financial system characterised by indirect monetary policy. Such operations require an understanding of the transmission mechanism. Lack of empirical analysis of the monetary transmission mechanism in Botswana and developing countries of Africa in general, is the main motivating factor behind this thesis. The main objective of this thesis is, therefore, to estimate the transmission mechanism of monetary policy in Botswana. Three different, but complementary techniques (the Narrative Approach, Vector Autoregression (VAR) analysis and the Structural Approach involving the estimation of a small structural model for Botswana economy) are used. Results from these methods tell a consistent story and indicate that monetary policy in Botswana affects real output and inflation through the interest rate channel, while the exchange rate channel is not operational. The credit channel is also active but not strong. The structural approach also indicates that devaluation is contractionary in Botswana, but more research is necessary before firmer conclusions could be made.

Submitted by Raimundo Câmara Filho (raimundo.camara@enel.com) on 2015-11-02T20:57:35Z No. of bitstreams: 1 Dissertação Versão aprovada, com ficha catalográfica e assinaturas da banca.pdf: 1997770 bytes, checksum: aa296c2e80c524f65734265773e7072e (MD5) / Approved for entry into archive by GILSON ROCHA MIRANDA (gilson.miranda@fgv.br) on 2017-04-19T19:06:48Z (GMT) No. of bitstreams: 1 Dissertação Versão aprovada, com ficha catalográfica e assinaturas da banca.pdf: 1997770 bytes, checksum: aa296c2e80c524f65734265773e7072e (MD5) / Approved for entry into archive by Marcia Bacha (marcia.bacha@fgv.br) on 2017-05-05T17:02:42Z (GMT) No. of bitstreams: 1 Dissertação Versão aprovada, com ficha catalográfica e assinaturas da banca.pdf: 1997770 bytes, checksum: aa296c2e80c524f65734265773e7072e (MD5) / Made available in DSpace on 2017-05-05T17:03:45Z (GMT). No. of bitstreams: 1 Dissertação Versão aprovada, com ficha catalográfica e assinaturas da banca.pdf: 1997770 bytes, checksum: aa296c2e80c524f65734265773e7072e (MD5) Previous issue date: 2007-05-31 / Monetary policy actions are believed to be transmitted to the economy through their effects on market interest rates. However, it is observed that the relationship between monetary policy and market interest rates seems quite complex. Although casual observation suggests a close connection between monetary policy actions and short-term interest rates, the relationship between policy actions and long-term interest rates is not so evident. This study estimates the response of the Brazilian term structure of interest rates, from the implementation of the Inflation Targeting Regime until March 2007. Using a model that captures the tendency of market rates to anticipate policy actions, this study finds evidence of a stronger response of long-term rates to innovations in the Selic rate than found in previous research. / A política monetária é transmitida à economia através de seus efeitos sobre o mercado de taxas de juros. Na prática, entretanto, observa-se que o relacionamento entre a taxa de juros básica e as demais taxas de juros de mercado aparenta ser bastante complexo. Ainda que exista farta evidência de que a política monetária produza efeitos previsíveis sobre as taxas de juros de curto prazo, a relação entre as ações de política monetária e as taxas de juros de prazos mais longos não é tão evidente. Nesse estudo, estima-se a resposta da estrutura a termo de taxas de juros brasileira às medidas de política monetária anunciadas, desde a implantação do regime de metas de inflação até março de 2007. Utilizando um modelo simples, mas que captura a tendência do mercado de antecipar as futuras ações de política monetária, encontramos uma resposta muito maior do que as reportadas em estudos anteriores.