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Twenty-five years of inflation targeting in South Africa: Going from 6% to 3%

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  • Philippe Burger

Abstract

This paper proposes that the South African Reserve Bank should pursue a 3% inflation target, instead of the current 4.5% midpoint of a 3%-to-6% target range. Doing so may also result in lower inflation volatility, thereby reducing nominal exchange rate risk for investment and trade, and may thus support economic growth. Using a two-regime Markov-switching model, the analysis shows that since the global financial crisis, periods of higher inflation volatility are much shorter. Thus, inflation is relatively better anchored since the global financial crisis.

Suggested Citation

  • Philippe Burger, 2025. "Twenty-five years of inflation targeting in South Africa: Going from 6% to 3%," WIDER Working Paper Series wp-2025-42, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2025-42
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    References listed on IDEAS

    as
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    Keywords

    Inflation targeting; Sacrifice ratio; Budget deficits; Markov switching; South Africa; Prices;
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