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A Bayesian-Estimated Model of Inflation Targeting in South Africa

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  • Thomas Harjes
  • Luca Antonio Ricci

Abstract

This paper estimates a small dynamic macroeconomic model for the South African economy with Bayesian methods. The model is tailored to assessing the impact of domestic as well as external shocks on inflation within an inflation-targeting framework, by incorporating forward-looking behavior of private agents and of the monetary authority. The model is able to display important empirical features of the monetary transmission mechanism that have been found in other studies. It helps to integrate the short-term inflation outlook into a consistent medium-term framework and to design the policy response for various shocks that affect inflation.

Suggested Citation

  • Thomas Harjes & Luca Antonio Ricci, 2010. "A Bayesian-Estimated Model of Inflation Targeting in South Africa," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 407-426, June.
    • Handle: RePEc:pal:imfstp:v:57:y:2010:i:2:p:407-426
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    Cited by:

    1. Michal Andrle & Andrew Berg & R. Armando Morales & Rafael Portillo & Jan Vlcek, 2015. "On the Sources of Inflation in Kenya: A Model-Based Approach," South African Journal of Economics, Economic Society of South Africa, vol. 83(4), pages 475-505, December.
    2. Muellbauer, John & Sinclair, Peter & Aron, Janine & Farrell, Greg, 2010. "Exchange Rate Pass-through and Monetary Policy in South Africa," CEPR Discussion Papers 8153, C.E.P.R. Discussion Papers.
    3. Mr Steinbach & Pt Mathuloe & Bw Smit, 2009. "An Open Economy New Keynesian Dsge Model Of The South African Economy," South African Journal of Economics, Economic Society of South Africa, vol. 77(2), pages 207-227, June.
    4. Mr. Andrew Berg & Ms. Filiz D Unsal & Mr. Rafael A Portillo, 2010. "On the Optimal Adherence to Money Targets in a New-Keynesian Framework: An Application to Low-Income Countries," IMF Working Papers 2010/134, International Monetary Fund.
    5. Charl Jooste & Marina Marinkov, 2012. "South Africa'S Transition To A Consolidated Budget," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 181-199, June.
    6. Kubo, Akihiro, 2017. "The macroeconomic impact of foreign exchange intervention: An empirical study of Thailand," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 243-254.
    7. Fadia Al Hajj & Gilles Dufrénot & Kimiko Sugimoto & Romain Wolf, 2015. "Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Sub-Saharan Africa," The Developing Economies, Institute of Developing Economies, vol. 53(4), pages 237-271, December.
    8. Mr. Alfredo Cuevas & Secil Topak, 2008. "Monetary Policy and Relative Price Shocks in South Africa and Other Inflation Targeters," IMF Working Papers 2008/289, International Monetary Fund.
    9. Malikane, Christopher & Ojah, Kalu, 2014. "Fisher's Relation and the Term Structure: Implications for IS Curves," MPRA Paper 55553, University Library of Munich, Germany.
    10. Doojav, Gan-Ochir & Gantumur, Munkhbayar, 2020. "Measuring the natural rate of interest in a commodity exporting economy: Evidence from Mongolia," International Economics, Elsevier, vol. 161(C), pages 199-218.
    11. Fadia Al Hajj & Gilles Dufr??not, & Kimiko Sugimoto & Romain Wolf, 2013. "Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Ghana, South Africa and the WAEMU," William Davidson Institute Working Papers Series wp1062, William Davidson Institute at the University of Michigan.

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