This book focuses on various aspects of inflation dynamics in South Africa. Chapters in the book present empirical evidence on the role of thresholds and asymmetries they introduce to the inflationary process associated with the exchange rate and its volatility on the exchange rate pass-through. The role of adverse shocks emanating from fiscal policy, labour and credit markets; and inflation expectations on policy trade-offs is extensively explored. The appropriateness of the 3 to 6 per cent inflation target band and how it relates to price stability and anchoring inflation expectations is demonstrated via empirical evidence of the thresholds and the symmetries they induce on the monetary policy trade-off. Evidence contained in the book shows that the 3 to 6 per cent inflation target band captures the meaning of price stability in South Africa.
KeywordsMonetary Policy Fiscal Policy Exchange Rate Volatility Exchange Rate Change Inflation Expectation
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