An empirical investigation of exchange rate pass-through in South Africa, Issues 2002-2165
International Monetary Fund, 2002 - Business & Economics - 27 pages
This paper analyzes the degree to which fluctuations in the nominal exchange rate passthrough to consumer prices in South Africa. While the average pass-through is found to be low, evidence from a structural vector autoregression suggests it is much higher for nominal (versus real) shocks. Historical decompositions suggest that the nominal exchange rate depreciation up to November 2001 is attributable primarily to negative real shocks, which explains why CPIX (consumer price index excluding interest on mortgate bonds) inflation did not increase significantly until December 2001, when positive nominal shocks began to contribute to the depreciation.
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IE Identifying The Source of Exchange Rate Shocks
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African Reserve Bank Akaike AIC Alternative Exchange alternative measures bilateral rand-U.S. dollar Cholesky decomposition Core Inflation CPIX inflation CPIX model CPLX DLCP dlcpix dlmprice DLOIL GAP DLE dlproddp dollar exchange rate effective exchange rate Equations Sample exchange rate depreciation Exchange Rate Pass-Through exchange rate shocks exogenous variable F-statistic foreign prices Headline Inflation headline prices impact impulse response functions Inflation VAR Model Jarque-Bera test Log likelihood long-run restrictions matrix Mean dependent 0.00 measures of consumer Model Lag length monetary policy negative real shocks nominal and real nominal effective exchange nominal exchange rate output gap pass-through elasticity percent positive nominal shocks producer price inflation rand rand-U.S. dollar exchange rate and relative real effective exchange real exchange rate relative prices S.D. dependent S.E. equation SARB Schwarz SC shocks to producer South Africa South African Reserve structural shocks Sum sq Summary Statistics supply shocks Test statistics U.S. dollars unit root variance-covariance matrix vector autoregression