{
  "title": "Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa",
  "publication": "IMF Working Papers, July 30, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/07/30/monetary-policy-credibility-and-exchange-rate-pass-through-in-south-africa-46050",
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  "summary": "This paper investigates the key factors that explain the documented decline in the exchange rate pass-through in South Africa over the past two decades, which coincides with the adoption of the inflation-targeting regime.",
  "sections": [
    {
      "heading": "Main findings",
      "content": "- The documented decline in the exchange rate pass-through in South Africa over the past two decades coincides with the adoption of the inflation-targeting regime.\n- The paper conjectures that the decline in pass-through is largely due to improved monetary policy credibility.\n- Using the monetary policy credibility index derived in the analysis, the paper confirms that the declining pass-through is explained by improving monetary policy credibility despite many shocks to the economy."
    },
    {
      "heading": "Authors and publication",
      "content": "- By Alain N. Kabundi, Montfort Mlachila\n- July 30, 2018\n- Working Paper No. 2018/173\n- Pages: 29\n- Volume: 2018\n- Issue: 173\n- DOI: https://doi.org/10.5089/9781484371671.001\n- ISBN: 9781484371671\n- ISSN: 1018-5941\n- Stock No: WPIEA20180173"
    },
    {
      "heading": "Methodology — measuring monetary policy credibility",
      "content": "- Monetary policy credibility is measured by the standard deviation of individual inflation forecasts.\n- The analysis proceeds in two phases:\n  - Phase 1: Documents factors that explain monetary policy credibility.\n  - Phase 2: Analyzes determinants of exchange rate pass-through using the credibility index derived in Phase 1."
    },
    {
      "heading": "Determinants of monetary policy credibility (Phase 1 results)",
      "content": "- Monetary policy credibility, as measured by the standard deviation of individual inflation forecasts, is negatively affected by:\n  - the level of inflation itself,\n  - monetary policy uncertainty,\n  - a measure of the unobserved stochastic volatility of inflation."
    },
    {
      "heading": "Determinants of exchange rate pass-through (Phase 2 results)",
      "content": "- The declining exchange rate pass-through is explained by the improving monetary policy credibility established in Phase 1.\n- The paper documents this result as robust to the many shocks experienced by the South African economy over the period studied."
    },
    {
      "heading": "Subject coverage and keywords",
      "content": "- Subjects: Banking, Exchange rate pass-through, Foreign exchange, Import prices, Inflation, Inflation targeting, Labor, Labor unions, Monetary policy, Prices\n- Keywords include: Africa, central bank, credibility coefficient, credibility index, exchange rate, exchange rate pass-through, Import prices, Inflation, inflation expectation, Inflation targeting, Labor unions, monetary policy authorities, monetary policy credibility, monetary policy effectiveness, monetary policy uncertainty, South Africa, WP\n\nItalic: 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.\n\n---\n\n Content in this bundle\n\n- Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa, WP/18/173, July 2018\n  - Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa, WP/18/173, July 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa, WP/18/173, July 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/07/30/monetary-policy-credibility-and-exchange-rate-pass-through-in-south-africa-46050"
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    "Authors: Alain N. Kabundi, Montfort Mlachila",
    "Published: July 30, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484371671.001",
    "The documented decline in the exchange rate pass-through in South Africa over the past two decades coincides with the adoption of the inflation-targeting regime.",
    "The paper conjectures that the decline in pass-through is largely due to improved monetary policy credibility.",
    "Using the monetary policy credibility index derived in the analysis, the paper confirms that the declining pass-through is explained by improving monetary policy credibility despite many shocks to the economy.",
    "By Alain N. Kabundi, Montfort Mlachila",
    "July 30, 2018",
    "Working Paper No. 2018/173",
    "Pages: 29",
    "Volume: 2018",
    "Issue: 173",
    "DOI: https://doi.org/10.5089/9781484371671.001",
    "ISBN: 9781484371671",
    "ISSN: 1018-5941",
    "Stock No: WPIEA20180173",
    "Monetary policy credibility is measured by the standard deviation of individual inflation forecasts.",
    "The analysis proceeds in two phases:",
    "Monetary policy credibility, as measured by the standard deviation of individual inflation forecasts, is negatively affected by:",
    "The declining exchange rate pass-through is explained by the improving monetary policy credibility established in Phase 1.",
    "The paper documents this result as robust to the many shocks experienced by the South African economy over the period studied.",
    "Subjects: Banking, Exchange rate pass-through, Foreign exchange, Import prices, Inflation, Inflation targeting, Labor, Labor unions, Monetary policy, Prices",
    "Keywords include: Africa, central bank, credibility coefficient, credibility index, exchange rate, exchange rate pass-through, Import prices, Inflation, inflation expectation, Inflation targeting, Labor unions, monetary policy authorities, monetary policy credibility, monetary policy effectiveness, monetary policy uncertainty, South Africa, WP",
    "**Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa, WP/18/173, July 2018**"
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