Abstract
Evidence shows that fuel levies amplify the effect of the rand per United States of America dollar (R/US$) exchange rate depreciation and oil price increases on petrol price inflation. At the same time, fuel levies also amplify the impact of petrol price inflation on headline inflation. In addition, we assess the role of fuel levies on the repo rate responses to headline inflation, the results show that fuel levies propagate the increase in the repo rate due to positive inflation shocks.
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Notes
- 1.
This is the second highest expenditure item after the housing, water, electricity, gas and other fuels category.
- 2.
The general levy and the RAF are determined on an annual basis by the National Treasury. The RAF Fuel Levy is a compulsory contribution to social security benefits and provides a social security safety net to the country by making available compulsory social insurance cover to all road users in South Africa. The RAF provides compulsory cover to all users of domestic roads, citizens and foreigners, against injuries sustained or death arising from accidents involving motor vehicles within the borders of the country. This cover is in the form of indemnity insurance to persons who cause the accident, as well as personal injury and death insurance to victims of motor vehicle accidents and their families. For further details see https://www.raf.co.za/About-Us/Pages/Fuel-Levy.aspx.
- 3.
This means that the general fuel levy is not a specific road related expense tax but is treated as a general tax. For further details see http://www.treasury.gov.za/publications/other/MinAnsw/2014/Reply%20to%20PQ%20371%20[NW468E].pdf.
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Ndou, E., Gumata, N., Tshuma, M.M. (2019). Monetary and Fiscal Policy Interactions on the Inflation Process: The Role of the Fuel Levies Channel. In: Exchange Rate, Second Round Effects and Inflation Processes. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13932-2_21
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DOI: https://doi.org/10.1007/978-3-030-13932-2_21
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