Inflation targeting in south africa pdf

Inflation targeting in south africa wiley online library. There is no obvious theoretical consensus that inflation targeting could affect output. Inflation targeting and its impact on monitory policy. We analyze the impact of inflation, growth and exchange rate on unemployment in south africa using annual data spanning 19802017. The south african reserve bank sarb moved to an official inflation targeting. Although the bank tried to make the market price stable, but failed to do so within the given time limit because of high inflation.

Inflation targeting monetary policy, inflation volatility. To date, inflation targeting has not made inroads into african economies, with only ghana and south africa having formally adopted this policy regime. Speech by mr t t mboweni, governor of the south african reserve bank, at the bissarb reserve. Appropriateness of inflation targeting in south africa. In my governors address at the ordinary general meeting of shareholders of the reserve bank on 24.

The sarb has the duty to protect the value of the domestic currency while maintaining price stability. Thats why inflation targeting is espoused in south africa to pull down the inflation rate. Prior to adopting the inflationtargeting framework, the bank had adopted a number of frameworks. One of the features of an inflationtargeting framework is the greater degree of transparency it brings to monetary policy. Pdf in this study we focus on the south african experience with inflation targeting. Prior to 2000, during the midtolate 1990s, the sarb took a more eclectic approach. Inflation targeting is one of the key monetary frameworks that many central banks, south africa included, have adopted in conducting monetary policy. South africa is to achieve and maintain price stability in the interest of sustainable and balanced economic development and growth. In the early 1990s, long term price stability has been regarded as the central goal for monetary policy, hence inflation targeting. The south african reserve bank sarb maintains that longterm growth is stimulated by low inflation. Inflation targeting, inflation volatility, garch, inflation expectations. The inflation targeting framework in south africa involves communication between the government treasury and the sarb in setting a target or band for the rate of inflation over a period of time. Inflation targeting is increasingly seen as the best practice for central bank policy in many economies around the world, including a growing number of developing countries. A recent study by phiri 2010 further suggests that a midrange inflation target of 8 percent is sufficient in terms of maximizing economic growth in south africa.

Inflation targeting monetary policy, inflation volatility and economic. There is evidence of growing concern regarding south africas monetary policy framework. In south africa, formal inflation targeting was adopted by south african reserve bank sarb in the february of 2000, with an objective of maintaining cpix1 inflation between the targetband of 3 percent to 6 percent by 2002, using discretionary changes in repurchase repo rate as its main policy instrument. With the global financial crisis becoming a global economic crisis, the south african economy is facing challenges both from external and domestic quarters in terms of lower aggregate demand. The introduction of the inflation targeting monetary policy was expected not only to maintain the inflation rate within the target range but also reduce its volatility. In the following sections we will try to argue that.

Inflation targeting framework south african reserve bank. Monitory policy in south africa is conducted by the south african. South africa has adopted flexible inflation targeting, wherein considerations for other macroeconomic variables are prioritized. South africa formally introduced inflation targeting in february 2000, after announcing the intention to adopt the framework in august 1999. Inflation targeting is a monetary policy framework in which the central bank announces an explicit inflation target and implements policy to achieve this target directly. Pdf inflation targeting monetary policy and unemployment. Inflation targeting in south africa had been adopted by the south african reserve bank at the commencement of this millennium to implement a better monetary policy. Merits of inflation targeting in south africa 16 2. Inflation targeting monetary policy, inflation volatility and economic growth in south africa wolassa l kumo1 1 wolassa l. The paper concludes with a discussion of alternative approaches to monetary policies and the institutional constraints that would need to be addressed to allow central banks to play a stronger developmental role in subsaharan african countries. Between 1960 and 1998, these included exchangerate targeting, discretionary monetary policy, monetaryaggregate targeting and an eclectic approach. The appropriateness of inflation targeting in south africa is examined. There is no obvious theoretical consensus that inflation targeting could affect output growth. Using the ardl methodology we find that there is a negative long.