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The Effects of Inflation Targeting on Exchange Rate Pass-Through to Domestic Prices: A Case Study of South Africa

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  • Oluwasheyi Oladipo

Abstract

Inflation targeting is increasingly seen as a crucial monetary policy by many economies in their quest for economic growth. The choice of an appropriate exchange rate regime, continue to be crucial in macroeconomic policy. Using data from 1970q1 to 2015q4, the paper examines the effects of inflation targeting on exchange rate pass-through. Applying a VAR model, the results show that inflation targeting has significant impacts on the movements of inflation, output and the exchange rate. The pass-through to consumer prices decreased and there was a reduction in the influence of foreign producer costs on imports prices after adopting inflation targeting.JEL classification numbers: E31, E47, E52, F41Keywords: Inflation targeting, Pass-Through, Prices, and Exchange rate

Suggested Citation

  • Oluwasheyi Oladipo, 2017. "The Effects of Inflation Targeting on Exchange Rate Pass-Through to Domestic Prices: A Case Study of South Africa," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(6), pages 1-4.
    • Handle: RePEc:spt:admaec:v:7:y:2017:i:6:f:7_6_4
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    2. Taguchi, Hiroyuki, 2019. "Inflation targeting and the pass-through effect: The case of Mongolia," MPRA Paper 92988, University Library of Munich, Germany.

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    More about this item

    Keywords

    inflation targeting; pass-through; prices; and exchange rate;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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