Exchange Rate, Second Round Effects and Inflation Processes: Evidence From South Africa

Description

This book focuses on the exchange rate pass-through (ERPT), second round effects and the inflation process in South Africa. The authors demonstrate that magnitudes of the second round effects of the exchange rate depreciation and oil price shocks depend on inflation regimes. The impact of positive oil price shocks on inflation is weakened by monetary policy credibility. Evidence shows the influence of oil price on unit labour costs and correlation between exchange rate changes and inflation has weakened. In addition, ERPT is reduced by low business and consumer confidence, high trade openness, low inflation and high exchange rate volatility which weaken real economic activity. Both monetary and fiscal policy credibility lowers the sizes of ERPT to inflation and inflation expectations. Fiscal policy via fuel levies, administered prices and public transport inflation channel impacts the responses of monetary policy to inflation shocks. The authors show that second round effects contribute very little to wage inflation following an exchange rate depreciation shock. Both lending rate and household consumption responds asymmetrical to repo rate changes. This book will appeal to policymakers, students, academics and analysts. Front Matter ....Pages i-xxviii Front Matter ....Pages 1-1 Introduction (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 3-18 Policy Implications of ERPT and Ongoing Debates (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 19-35 How Big Are the Second Round Effects of the Exchange Rate Depreciation Transmitted via Consumer Price Inflation to Average Wage Settlements? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 37-48 Does the Size of Second-Round Effects on Growth in Total Remuneration Per Worker Due to Exchange Rate Depreciation Shock Vary According to Inflation Regimes? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 49-57 Do Inflation Regimes Influence the Size of Second-Round Effects on Private Sector Wage Inflation Following an Exchange Rate Depreciation Shock? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 59-67 Do Inflation Regimes Matter for the Sizes of Second-Round Effects of Oil Price Shocks to Consumer Price Inflation via the Unit Labour Costs Channel? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 69-80 Front Matter ....Pages 81-81 Monetary Policy Credibility and the Time-Varying Exchange Rate Pass-Through to Consumer Price Inflation (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 83-95 Monetary Policy Credibility and the Exchange Rate Pass-Through to Inflation (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 97-110 Does the Monetary Policy Channel Impact the Transmission of Exchange Rate Depreciation Shocks to Inflation? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 111-119 Does Monetary Policy Credibility Impact the Responses of Unit Labour Costs to Exchange Rate Depreciation Shocks? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 121-129 Does Monetary Policy Credibility Play a Role in the Transmission of Oil Price Shocks to Inflation Expectations? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 131-138 Does Monetary Policy Credibility Affect Market-Based Inflation Expectations? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 139-148 Front Matter ....Pages 149-149 Does the Consumer Confidence Channel Affect the Response of Inflation to Exchange Rate Depreciation Shocks? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 151-162 Does Weak Business Confidence Impact the Pass-Through of the Exchange Rate Depreciation Shocks to Inflation? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 163-176 Does the Exchange Rate Volatility Matter for the Reaction of Consumer Price Inflation to Exchange Rate Depreciation Shock? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 177-197 Does Trade Openness or Globalisation Matter for the Response of Inflation to Exchange Rate Depreciation Shocks? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 199-214 Front Matter ....Pages 215-215 Does Fiscal Policy Credibility Matter for the Exchange Rate Pass-Through to Consumer Price Inflation in South Africa? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 217-226 Has the Fiscal Policy Credibility Shock Impacted the Time-Varying Exchange Rate Pass-Through to Consumer Price Inflation? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 227-237 Is the Impact of High Monetary Policy Credibility on Consumer Price Inflation and the ERPT Reinforced by Fiscal Policy Credibility? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 239-251 Front Matter ....Pages 253-253 What Is the Role and Costs of Administered Prices? Evidence from Monetary Policy Responses to Positive Inflation Shocks (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 255-269 Monetary and Fiscal Policy Interactions on the Inflation Process: The Role of the Fuel Levies Channel (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 271-281 Monetary and Fiscal Policy Interactions in the Inflation Process: The Role of Public Transport Inflation Channel (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 283-296 Monetary Policy and Inflation Rates by Expenditure Deciles and Rural Areas (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 297-305 Front Matter ....Pages 307-307 Is There Evidence of Asymmetries in the Adjustment of the Lending Rate Responses to Repo Rate Changes? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 309-326 Is There Evidence of Rigidity in the Corporate Lending Rate Adjustment Following Repo Rate Changes? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 327-337 Does the Flexible Mortgage Rate Exhibit Asymmetric Response to Changes in the Repo Rate? Are the Effects Consistent with Upward or Downward Rigidity? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 339-349 What Is the Role of Competition in the Banking Sector on the Interest Rate Pass-Through and Loan Intermediation Mark-Up? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 351-370 Does Consumption Growth Respond Asymmetrically to Positive and Negative Repo Rate Changes? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 371-380 Does the Household Financial Wealth Explain the Asymmetric Response of Consumption to Monetary Policy Shock in South Africa? (Eliphas Ndou, Nombulelo Gumata, Mthokozisi Mncedisi Tshuma)....Pages 381-390 Back Matter ....Pages 391-416