The Determinants of Time‐Varying Exchange Rate Pass‐Through in South Africa |
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Authors: | Charl Jooste Yaseen Jhaveri |
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Affiliation: | Department of Economic Policy, National Treasury, , Pretoria, Gauteng, 0002 South Africa |
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Abstract: | The pass‐through of shifts in the rand exchange rate to consumer price inflation has been well documented for South Africa. Although estimates of the absolute level of pass‐through vary, some studies document a decline in pass‐through over time. In order to better illuminate the policy implications of pass‐through, this paper seeks to add to the literature by decomposing pass‐through into a number of time‐varying impulses. This has the advantage of providing deeper insights of pass‐through over time and across various monetary policy regimes. We then analyse the determinants of time‐varying pass‐through. Our results confirm that pass‐through has declined over time but is subject to a stable and low inflation environment. We also show that a volatile exchange rate leads to higher pass‐through. |
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Keywords: | C3 E31 Time‐varying pass‐through inflation Bayesian modelling monetary policy |
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