Download Free The Determinants Of Inflation In South Africa Book in PDF and EPUB Free Download. You can read online The Determinants Of Inflation In South Africa and write the review.

This paper investigates the key factors that explain the documented decline in the exchange rate pass-through in South Africa over the past two decades, which coincides with the adoption of the inflation-targeting regime. The paper conjectures, in line with the literature, that this outcome is largely due to improved monetary policy credibility. To do this, it first documents the factors that explain monetary policy credibility. Using the standard deviation of individual inflation forecasts as a measure of monetary policy credibility, its shows that the latter is negatively affected by the level of inflation itself, monetary policy uncertainty, and a measure of the unobserved stochastic volatility of inflation. The second phase proceeds by analyzing the determinants of the pass-through using the monetary policy credibility index derived from the first phase. The paper confirms the remarkable achievement that, despite the many shocks that the economy has witnessed, the declining pass-through is indeed explained by the improving monetary policy credibility.
Mozambique’s inflation rate was consistently high until 1995, and then plunged in 1996 to 17 percent from 70 percent in 1994. This paper suggests that Mozambique’s inflation pattern is a combination of a “fundamental” trend set by economic policies, seasonal behavior that follows closely that of agriculture, and a collection of irregular events that corresponds mainly to agroclimatic conditions. The empirical results show that the marked tightening of monetary policy in 1996 was the ultimate reason for the control of inflation in 1996, and hence seems to correspond to a change in the “fundamental” trend of inflation that may have long-lasting effects.
Inflation -- South Africa.
This book offers a comprehensive empirical analysis of South African inflation dynamics, using a variety of techniques including counterfactual analysis. The authors elaborate the roles in inflation of thresholds, nonlinearities and asymmetries introduced by economic conditions such as the size of exchange rate changes and volatility, GDP growth, inflation, output gap, credit growth, sovereign spreads and fiscal policy, providing new policy evidence on the impact of these. Ndou and Gumata apply techniques to determine the prevalence of updating inflation expectations, and reconsider the propagation effects of a number of inflation risk factors. Asking to what extent the evidence points to a need to enforce price stability and the anchoring of inflation expectation, the book fills existing gaps in South African Policy, and maintains a clear argument that price stability is consistent with the 3 to 6 per cent inflation target range, and that threshold application should form an important aspect of policy analysis in periods of macroeconomic uncertainty. As such, the book serves as an excellent reference text for academic and policy discussions alike.
Does the South African rand’s relatively large volatility affect inflation? To shed some light on this question, a standard estimation technique of exchange rate pass-through to inflation is extended to incorporate exchange rate volatility. Estimated results suggest that higher exchange rate volatility tends to increase core inflation but to a relatively limited extent in South Africa. The finding lends support to the policy of allowing the rand to float freely and work as a shock absorber, consistent with the nation’s successful inflation targeting regime.
The South African Reserve Bank has continued to fulfill its constitutional mandate to protect the value of the local currency by keeping inflation low and steady. This paper provides evidence that monetary policy tightening aimed at maintaining low and stable inflation could at the same time reduce consumption inequality over a 12–18 month horizon, commonly understood as the transmission lag of monetary policy action to the real economy, and similar to the distance between survey waves used in the analysis. In response to “exogenous” monetary policy tightening, the real consumption of individuals at lower ends of the consumption distribution declines relatively modestly, or even increases. With greater reliance on government transfers, thus smaller reliance on labor income, and relatively larger food consumption, these individuals appear to benefit mainly from lower inflation. By contrast, the real consumption of individuals at higher ends of the consumption distribution is more likely to decline due to lower labor income, weaker asset price performance, and higher debt service cost.