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A Structural Model of the Inflation Process in South Africa

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  • Janine Aron
  • John Muellbauer
  • Benjamin W. Smit

Abstract

We build a 4-equation model of the inflation process in South Africa (which has recently adopted inflation targeting), including the exchange rate, consumer prices, producer price, and import prices. This provides useful information on the speed and extent of exchange rate pass-through, and illuminates the various channels through which monetary policy influences inflation. The model is in the tradition of central bank models of the inflation process, but carefully tests for asymmetries, structural breaks and expectations effects, and applies a range of econometric tests and methods to refute the charge that such models necessarily impose `incredible` restrictions, Sims (1980).

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2004-08.

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Date of creation: 01 Mar 2004
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Handle: RePEc:oxf:wpaper:wps/2004-08

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  1. Hans-Martin Krolzig, 2000. "Computer Automation of General-to-Specific Model Selection Procedures," Econometric Society World Congress 2000 Contributed Papers 0411, Econometric Society.
  2. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Christopher A. Sims, 1996. "Macroeconomics and Methodology," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 105-120, Winter.
  4. Janine Aron & John Muellbauer, 2002. "Interest Rate Effects on Output: Evidence from a GDP Forecasting Model for South Africa," Economics Series Working Papers WPS/2002-04, University of Oxford, Department of Economics.
  5. Oriana Bandiera & Gerard Caprio Jr. & Patrick Honohan & Fabio Schiantarelli, 1998. "Does Financial Reform Raise or Reduce Savings?," Boston College Working Papers in Economics 413, Boston College Department of Economics.
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  7. Janine Aron & Ibrahim Elbadawi and Brian Kahn, 1997. "Determinants of the real exchange rate in South Africa," Economics Series Working Papers WPS/1997-16, University of Oxford, Department of Economics.
  8. Janine Aron & John Muellbauer, 2004. "Construction of CPIX Data for Forecasting and Modelling in South Africa," Development and Comp Systems 0409056, EconWPA.
  9. Aron, Janine & Muellbauer, John, 2000. "Personal and Corporate Saving in South Africa," CEPR Discussion Papers 2656, C.E.P.R. Discussion Papers.
  10. Lucio Sarno & Mark P. Taylor, . "Real Interest Rates, Liquidity Constraints and Financial Deregulation: Private Consumption Behaviour in the UK," Economics and Finance Discussion Papers, Economics and Finance Section, School of Social Sciences, Brunel University 97-12, Economics and Finance Section, School of Social Sciences, Brunel University.
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  16. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
  17. David Hendry & Hans-Martin Krolzig, 2000. "Computer Automation of General-to-Specific Model Selection Procedures," Economics Series Working Papers 3, University of Oxford, Department of Economics.
  18. Ronald MacDonald & Luca Antonio Ricci, 2003. "Estimation of the Equilibrium Real Exchange Rate for South Africa," IMF Working Papers 03/44, International Monetary Fund.
  19. Aron, Janine & Ayogu, Melvin, 1997. "Foreign Exchange Market Efficiency Tests in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 6(3), pages 150-92, Supplemen.
  20. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 72, pages 584.
  21. Gunnar BÃ¥rdsen & Eilev S. Jansen & Ragnar Nymoen, 2002. "The Empirical (ir)Relevance of the New Keynesian Phillips Curve," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 2102, Department of Economics, Norwegian University of Science and Technology.
  22. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
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Cited by:
  1. Janine Aron & John Muellbauer, 2007. "Review of Monetary Policy in South Africa since 1994," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 16(5), pages 705-744, November.
  2. repec:cml:incocp:1-14 is not listed on IDEAS
  3. Aron, Janine & Muellbauer, John, 2006. "Review of Monetary Policy in South Africa: 1994-2004," CEPR Discussion Papers 5831, C.E.P.R. Discussion Papers.
  4. Tito Nícias Teixeira da Silva Filho, 2008. "Searching for the Natural Rate of Unemployment in a Large Relative Price Shocks' Economy: the Brazilian Case," Working Papers Series, Central Bank of Brazil, Research Department 163, Central Bank of Brazil, Research Department.
  5. Janine Aron & John Muellbauer, 2007. "Inflation dynamics and trade openness: with an application to South Africa," Economics Series Working Papers WPS/2007-11, University of Oxford, Department of Economics.
  6. Lawrence Edwards & Robert Z. Lawrence, 2006. "South African Trade Policy Matters: Trade Performance and Trade Policy," NBER Working Papers 12760, National Bureau of Economic Research, Inc.

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