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The Sensitivity Of South African Inflation Expectations To Surprises

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  • Monique Reid

Abstract

Price stability is widely recognised as the primary goal of modern monetary policy, and the management of private sector inflation expectations has become an essential channel through which this goal is achieved. This evaluation aims to improve the understanding of how the sensitivity of private sector inflation expectations to macroeconomic surprises in South Africa compares internationally, as this provides an indication of the contribution of monetary policy in South Africa to anchoring inflation expectations. If a central bank is credible, the financial markets should react less sensitively to macroeconomics surprises, because they trust the central bank to manage these incidents and achieve the objectives they communicated over the medium to long term. In this paper, the methodology of Gurkaynack "et al." is adopted in order to measure the sensitivity of South African inflation expectations to surprises. A comparison of South Africa's results with those of countries in the original studies supports the contention that the SARB (South African Reserve Bank) has encouraged inflation expectations to be relatively insensitive to macroeconomic surprises, and offers support for the inflation-targeting framework as a means to help anchor inflation expectations. Copyright (c) 2009 The Author. Journal compilation (c) 2009 Economic Society of South Africa.

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Bibliographic Info

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 77 (2009)
Issue (Month): 3 (09)
Pages: 414-429

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Handle: RePEc:bla:sajeco:v:77:y:2009:i:3:p:414-429

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Cited by:
  1. Rangan Gupta & Monique Reid, 2013. "Macroeconomic surprises and stock returns in South Africa," Studies in Economics and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 30(3), pages 266-282, June.
  2. Sonali Das & Rangan Gupta & Patrick T. Kanda & Monique Reid & Christian K. Tipoy & Mulatu F. Zerihun, 2012. "Real Interest Rate Persistence in South Africa: Evidence and Implications," Working Papers 201204, University of Pretoria, Department of Economics.
  3. Moura, Marcelo L. & Gaião, Rafael Ladeira, 2012. "Impact of macroeconomic surprises on the brazilian yield curve and expected inflation," Insper Working Papers, Insper Working Paper, Insper Instituto de Ensino e Pesquisa wpe_288, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  4. Marcelo L. Moura & Rafael L. Gaião, 2014. "Impact Of Macroeconomic Surprises On Thebrazilian Yield Curve And Expected Inflation," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Grad 051, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  5. Moura, Marcelo L. & Gaião, Rafael L., 2014. "Impact of macroeconomic surprises on the Brazilian yield curve and expected inflation," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 114-144.

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