QE ‘inappropriate’ for South Africa – Sarb paper
Asset purchases may create moral hazard and undermine debt management strategy, author says
Though quantitative easing has been deployed successfully in many emerging market economies, it remains “inappropriate” for South Africa, new research finds.
South African Reserve Bank economist David Fowkes says there are several key reasons that the central bank should not follow others into using QE. One is that the policy could create “moral hazard”, reducing the government’s incentive to take “difficult but necessary corrective action” on fiscal policy, he warns in the working paper.
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