Exchange Rate Volatility and Pass-Through to Inflation in South Africa
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Summary:
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.
Series:
Working Paper No. 2019/277
Subject:
Depreciation Exchange rate pass-through Exchange rates Foreign exchange Inflation National accounts Output gap Prices Production
English
Publication Date:
December 13, 2019
ISBN/ISSN:
9781513521572/1018-5941
Stock No:
WPIEA2019277
Pages:
27
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