Central Bank policy and the exchange rate under an inflation targeting regime: a case dtudy of South Africa
- Authors: Gonzo, Prosper
- Date: 2013
- Subjects: Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11476 , http://hdl.handle.net/10353/d1015043 , Foreign exchange rates -- Government policy -- South Africa , Inflation (Finance) -- South Africa , Monetary policy -- South Africa , Banks and banking, Central -- South Africa , South Africa -- Economic conditions , Banking industry -- Finance -- South Africa
- Description: This work examined the optimality of the inclusion of the exchange rate in the reaction function of the Central Bank in an inflation targeting framework. The study attempts to answer the question whether the exchange rate should have an independent role in an open economy Taylor-type rule. To this end, a Taylor-type rule is incorporating the exchange rate is estimated by the cointegration and vector error correction modeling (VECM) using quarterly data for the period of 1995 to 2009. The empirical studies point out the importance of the exchange rates in explaining and forecasting the behaviour of the South African Reserve Bank monetary policy control variable.
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Inflation targeting and inflation indicators: the case for inflation targeting in South Africa
- Authors: Jeke, Leward
- Date: 2012
- Subjects: South African Reserve Bank , Inflation (Finance) -- South Africa , Inflation targeting -- South Africa , Anti-inflationary policies -- South Africa , Economic indicators -- South Africa , Economic stabilization -- South Africa , Cointegration -- South Africa
- Language: English
- Type: Thesis , Masters , M Com
- Identifier: vital:11467 , http://hdl.handle.net/10353/d1007091 , South African Reserve Bank , Inflation (Finance) -- South Africa , Inflation targeting -- South Africa , Anti-inflationary policies -- South Africa , Economic indicators -- South Africa , Economic stabilization -- South Africa , Cointegration -- South Africa
- Description: The control of inflation requires a forecast of the future path of the price level and its indicators. Targeting inflation directly requires that the central bank (SARB) form forecasts of the likely path of prices paying close attention to a variety of indicators that shows the predictive power of inflation in the past periods. Inflation indicators might be cointegrated with the rate of inflation to predict the future inflation rates. Forecasting inflation may be very difficult at a particular period due to the fact that the array candidate indicators of inflation may neither be very stable nor very strong in their relationships with the rate of inflation. Although this might be the case, this research uses testable effects of each of the South African inflation indicators to the rate of inflation using econometrics tools to find that they have a long run trend with the rate of inflation in South Africa. It has been found that each of the indicator variables has a long run relationship with the rate of inflation. The major conclusion is that inflation indicator variables like money supply (M3), oil price, gold price, total employment, interest rates, exchange rates and output growth can be useful inflation indicators in targeting the future trends of inflation in South Africa according to the data used in this research although some studies in some countries find that inflation targeting is an insufficient framework for monetary policy in the presence of financial exuberance. The money supply, the oil prices, interest rates, the exchange rates, prices of gold, the employment and output growth are co-integrated with the rate of inflation representing a long-run relationship.
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