The Sensitivity of South African Inflation Expectations to Surprises
AbstractThe maintenance of 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, Sack and Swanson (2005a) is adopted in order to measure the sensitivity of South African inflation expectations to surprises. A comparison of South Africaâ€™s results with those of countries in the original studies supports the contention that the SARB (South African Reserve Bank) has encouraged private sector inflation expectations to be relatively insensitive to macroeconomic surprises, and it offers further support to the argument that the inflation targeting framework facilitates the anchoring of inflation expectations.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 131.
Date of creation: 2009
Date of revision:
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Other versions of this item:
- Monique Reid, 2009. "The Sensitivity Of South African Inflation Expectations To Surprises," South African Journal of Economics, Economic Society of South Africa, vol. 77(3), pages 414-429, 09.
- Monique Reid, 2009. "The sensitivity of South African inflation expectations to surprises," Working Papers 16/2009, Stellenbosch University, Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-AFR-2010-03-13 (Africa)
- NEP-ALL-2010-03-13 (All new papers)
- NEP-CBA-2010-03-13 (Central Banking)
- NEP-MAC-2010-03-13 (Macroeconomics)
- NEP-MON-2010-03-13 (Monetary Economics)
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- Rangan Gupta & Monique Reid, 2012.
"Macroeconomic Surprises and Stock Returns in South Africa,"
201212, University of Pretoria, Department of Economics.
- Rangan Gupta & Monique Reid, 2013. "Macroeconomic surprises and stock returns in South Africa," Studies in Economics and Finance, Emerald Group Publishing, vol. 30(3), pages 266-282, June.
- Rangan Gupta & Monique Reid, 2012. "Macroeconomic Surprises and Stock Returns in South Africa," Working Papers 05/2012, Stellenbosch University, Department of Economics.
- Moura, Marcelo L. & Gaião, Rafael Ladeira, 2012. "Impact of macroeconomic surprises on the brazilian yield curve and expected inflation," Insper Working Papers wpe_288, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- 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,"
201204, University of Pretoria, Department of Economics.
- 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 17/2012, Stellenbosch University, Department of Economics.
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