scholarly journals Inflation targeting and exchange rate pass-through to domestic prices: evidence from South Africa

2017 ◽  
Vol 5 (05) ◽  
pp. 01
Author(s):  
Oluwasheyi Oladipo
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through

scholarly journals An Empirical Analysis of Exchange Rate Pass-Through to Prices in South Africa (2002-2016)

2018 ◽  
Vol 10 (5(J)) ◽  
pp. 187-194
Author(s):  
Harris Maduku ◽  
Irrshad Kaseeram
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Makers ◽  
Monthly Data ◽  
Exchange Rate Fluctuations ◽  
Producer Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Year 2000

South Africa is currently running inflation targeting monetary policy since the year 2000 solely to achieve price stability. However, the persistent depreciation of the rand is making keeping inflation within the stipulated band very cumbersome. The objective of this paper is to find the duration taken by price indices to respond to exchange rate fluctuations. A Recursive VAR was used to investigate exchange rate passthrough (ERPT) to tradable prices in South Africa. Using monthly data, we find producer prices contributing highly to inflation with an average of 22% of fluctuations passed to prices. Large and persistent ERPT, especially on import and producer prices accompanied by high wage demands and a depreciating currency, are worrying factors for South Africa. Policy makers are advised to consider targeting the exchange rate if inflation is to be kept under control

scholarly journals Exchange Rate Volatility and Pass-Through to Inflation in South Africa

2019 ◽  
Vol 19 (277) ◽  
Author(s):  
Ken Miyajima
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
South African ◽  
Inflation Targeting ◽  
Shock Absorber ◽  
Exchange Rate Volatility ◽  
Limited Extent ◽  
Core Inflation ◽  
Pass Through ◽  
Exchange Rate Pass Through

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.

scholarly journals Exchange Rate Pass-Through to Domestic Prices: Evidence from OECD Countries

2017 ◽  
Author(s):  
Harun Bal ◽  
Mehmet Demiral ◽  
Filiz Yetiz
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Price Index ◽  
Oecd Countries ◽  
Domestic Prices ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
Exchange Rate Pass Through

There is an immense literature on the effects of exchange rate changes on macroeconomic indicators, specifically on the trade balance, growth, inflation, and overall productivity in open economies. One of the main attempts in the related literature is about ascertaining whether the exchange rate fluctuations alter domestic prices. This possible mechanism is called as the pass-through effect which is getting more important since the argument that exchange rate adjustment is a part of the solution for global rebalancing is empirically well-supported. Starting from this claim, this study purposes to explore whether there is an exchange rate pass-through effect in 19 high-income OECD countries over the period 1990-2015. To this end, using a panel data set of consumer price index, producer price index proxied by wholesale price index, the nominal effective exchange rates, and industrial production presented by the value-added share of industry sectors in gross domestic product, structural vector autoregressive (VAR) and autoregressive distributed lag (ARDL) models are estimated in an unbalanced panel data analysis procedure. Results reveal that exchange rate pass-through effects on the domestic prices are significant but not that strong in both the short-run and the long-run. Expectedly, the pass-through effects tend to diminish over time. The study concludes that policy-makers need to consider policy actions accompanying the exchange rate changes to ensure domestic price stability which consequently interacts with many macroeconomic indicators.

Conclusions

2016 ◽  
Author(s):  
Jeffry A. Frieden
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Policy ◽  
Theoretical Argument ◽  
Economic Agents ◽  
Cross Border ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Export Competition

This chapter summarizes key findings. This book makes a simple theoretical argument about the distributional implications of exchange rate policy. It suggests that economic actors with important cross-border interests, exposed to currency volatility, will tend to prefer more stable and predictable exchange rates. It also claims that tradables producers will, all else being equal, tend to prefer a depreciated real exchange rate. These concerns will be tempered by the extent of exchange rate pass-through—that is, the degree to which currency movements affect domestic prices. The analysis in this book shows that countries whose economic agents are more involved in cross-border trade are more likely to fix their exchange rates in order to reduce currency volatility. Countries with large groups susceptible to import or export competition—import-competing manufacturers and export farmers—are more likely to choose flexible exchange rates that allow currency depreciations. Governments facing an election encourage or allow currency appreciation that increases the purchasing power of consumers.

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