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

Author/Editor:

Ken Miyajima

Publication Date:

December 13, 2019

Electronic Access:

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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.

Series:

Working Paper No. 19/277

Subject:

English

Publication Date:

December 13, 2019

ISBN/ISSN:

9781513521572/1018-5941

Stock No:

WPIEA2019277

Format:

Paper

Pages:

27

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