Inflation Dynamics in South Africa

1. Front Matter

   Pages i-xlvi

   PDF

2. Introduction

   • Eliphas Ndou, Nombulelo Gumata

   Pages 1-16

3. Costs of Disinflation, Inflation Volatility and Policy Trade-offs

   1. Front Matter

      Pages 17-17

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   2. The Ball Approach to Disinflation Episodes, Output Costs and Sacrifice Ratios in South Africa

      • Eliphas Ndou, Nombulelo Gumata

      Pages 19-40

   3. The Output and Inflation Trade-off in South Africa

      • Eliphas Ndou, Nombulelo Gumata

      Pages 41-59

   4. Persistent Exchange Rate Volatility on the Taylor Curve

      • Eliphas Ndou, Nombulelo Gumata

      Pages 61-76

   5. Inflation Volatility and Non-Linear Effects of Inflation Shocks

      • Eliphas Ndou, Nombulelo Gumata

      Pages 77-89

   6. Exchange Rate Volatility Shock Effects on Inflation Volatility

      • Eliphas Ndou, Nombulelo Gumata

      Pages 91-98

   7. Does the Volatility of the R/US$ Exchange Rate Threshold Exert Non-Linear Effects on Inflation?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 99-111

   8. Persistent and Non-Persistent Exchange Rate Depreciation Effects on Inflation

      • Eliphas Ndou, Nombulelo Gumata

      Pages 113-123

   9. Relative Services Price Dispersion, Trend Inflation and Inflation Volatility

      • Eliphas Ndou, Nombulelo Gumata

      Pages 125-142

4. The Terms-of-Trade, Fiscal Policy, Labour Market Conditions and Inflation in South Africa

   1. Front Matter

      Pages 143-143

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   2. Negative Terms-of-Trade Shock, the Real Effective Exchange Rate and Repo Rate Adjustments

      • Eliphas Ndou, Nombulelo Gumata

      Pages 145-160

   3. Do Fiscal Policy Variables Drive Inflation in the Same Direction?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 161-172

   4. What Would Inflation and Repo Rate Be in the Absence of Increased Government Expenditure?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 173-179

   5. Labour Productivity and Unit Labour Costs Impact on Inflation: What Are the Implications for Monetary Policy?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 181-191

   6. Labour Market Conditions, Positive Inflation Shocks and Policy Rate Responses

      • Eliphas Ndou, Nombulelo Gumata

      Pages 193-208

5. The First Stage of the Exchange Rate Pass-through

   1. Front Matter

      Pages 209-209

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   2. Does World Import Growth Amplify Domestic Inflation Responses to Inflationary Shocks?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 211-227

   3. Where Does the Exchange Rate Pass-Through to Import Price Inflation Threshold Lie?

      • Eliphas Ndou, Nombulelo Gumata

      Pages 229-244

This book offers a comprehensive empirical analysis of South African inflation dynamics, using a variety of techniques including counterfactual analysis. The authors elaborate the roles in inflation of thresholds, nonlinearities and asymmetries introduced by economic conditions such as the size of exchange rate changes and volatility, GDP growth, inflation, output gap, credit growth, sovereign spreads and fiscal policy, providing new policy evidence on the impact of these. Ndou and Gumata apply techniques to determine the prevalence of updating inflation expectations, and reconsider the propagation effects of a number of inflation risk factors. Asking to what extent the evidence points to a need to enforce price stability and the anchoring of inflation expectation, the book fills existing gaps in South African Policy, and maintains a clear argument that price stability is consistent with the 3 to 6 per cent inflation target range, and that threshold application should form an important aspect of policy analysis in periods of macroeconomic uncertainty. As such, the book serves as an excellent reference text for academic and policy discussions alike.

• Inflation
• Disinflation
• Taylor Curve
• Garch methodology
• Supply shocks
• Volatility
• Price dispersion
• Tsay nonlinear approach
• GDP
• Monetary policy
• Exchange rate
• Fiscal policy shocks

• South Africa Reserve Bank, Pretoria, South Africa

  Eliphas Ndou

• South African Reserve Bank , Pretoria, South Africa

  Nombulelo Gumata

Eliphas Ndou is an economist at the South African Reserve Bank, and a lecturer at the University of the Witwatersrand, Johannesburg, South Africa. His research interests include international finance and macroeconomics, applied macro and microeconomics, monetary policy, fiscal policy, banking regulation and macro prudential policy.


Nombulelo Gumata is an economist at the South African Reserve Bank and a part-time lecturer/tutor at the Centre for Education in Economics and Finance Africa (CEEF Arica), South Africa, supporting students at the University of London in degrees and diplomas in Economics and Finance. Her research areas of interest include monetary economics, macro-economics, international economics and finance, fiscal policy, banking regulation and macro prudential policy.

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