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

December 13, 2019

Preview Citation

Format: Chicago

Ken Miyajima. Exchange Rate Volatility and Pass-Through to Inflation in South Africa, (USA: International Monetary Fund, 2019) accessed December 17, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Depreciation, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, National accounts, Output gap, Prices, Production

Keywords: Africa, Core inflation, Depreciation, ERPT terms, Exchange rate pass-through, Exchange rate variable, Exchange rate volatility, Exchange rates, Food price inflation, Fuel price inflation, Global, Inflation, NEER depreciation, Output gap, Price, Rand volatility, Volatility data, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/277
Stock No:

WPIEA2019277
ISBN:

9781513521572
ISSN:

1018-5941

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