In 1987/88, for example, the rate of growth in M3 was close to 30 per cent, and the rate of inflation 20 per cent. In 1992, growth in M3 was reduced to 8 per cent, and inflation declined to a single digit figure for the first time in 1993.
In recent years, however, with the major changes particularly in South Africa’s international financial relationships, the money supply model lost some of its usefulness. Over the past four years, the rate of increase in the money supply has persistently stayed around the level of about 15 per cent, being about 5 full percentage points above the annual guidelines of the Reserve Bank.