GDP Growth Threshold and Asymmetric Exchange Rate Pass-Through to Import Prices

  • Eliphas Ndou
  • Nombulelo Gumata


What level of GDP growth leads to asymmetric pass-through of rand against US dollar depreciation shocks to import prices and persistence of import price inflation? This chapter presents evidence that GDP growth amplifies the responses of import price inflation to inflation shocks. Furthermore, we estimate that the GDP growth threshold occurs at 2.1 per cent and leads to non-linear exchange rate pass-through to import price inflation. Import price inflation is more persistent above the threshold. The evidence is consistent with a model of optimizing importing firms, which suggests that degree of exchange rate pass-through is higher during periods of GDP growth. During periods of high growth, firms can increase marks-ups without losing market share. This also indicates that the behaviour of importers’ margins is aligned to changes in the GDP growth rate.


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© The Author(s) 2017

Authors and Affiliations

  • Eliphas Ndou
    • 1
  • Nombulelo Gumata
    • 1
  1. 1.South African Reserve BankPretoriaSouth Africa

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