Inflation persistence and monetary policy in South Africa: is the 3% to 6% inflation target too persistent?
MetadataShow full item record
Can the South African Reserve Bank's (SARB) substantially control inflation within their set target of 3% to 6%? We sought to investigate this phenomenon by examining multiple threshold effects in the persistence levels of quarterly aggregated inflation data collected between 2003 and 2014. To this end, we employ the three-regime threshold autoregressive (TAR) model of Hansen (2000). We favour this approach over other conventional linear econometric models as it permits us to test for varying persistency within the autoregressive (AR) components of the inflation process. Our empirical explorations reveal that the SARBs set target does indeed lie within a range in which inflation is found to be most persistent. Overall and more importantly, our results suggest that the SARB should either consider revising their set inflation target by redefining the inflation target range to accommodate higher inflation rates or the Reserve Bank should consider abandoning the inflation targeting regime altogether.
Showing items related by title, author, creator and subject.
Montshiwa, Volition Tlhalitshi; Moroke, Ntebogang Dinah (International Foundation for Research and Development (IFRD), 2017)Abstract: Sample size requirements are common in many multivariate analysis techniques as one of the measures taken to ensure the robustness of such techniques, such requirements have not been of interest in the area of ...
Rangasamy, Logan (University of Cape Town, 2017)This paper analyses the impact of petrol price movements on inflation outcomes in South Africa since the mid-1970s. The results show that, over time, the direct contribution of petrol inflation to headline inflation has ...
Examining asymmetric effects in the South African Phillips curve: evidence from logistic smooth transition regression models Phiri, Andrew (Inderscience, 2016)This study contributes to the foregoing literature by investigating asymmetric behaviour within the South African short-run Phillips curve for three versions of the Phillips curve specification namely; the New Classical ...