•   •

A Structural Model of the Inflation Process in South Africa Janine Aron, CSAE John N.J. Muellbauer, Nuffield College, University of Oxford Benjamin W. Smit, Bureau of Economic Research, Stellenbosch University Download the Paper (PDF format) - May 29, 2004 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: We build a 4-equation model of the inflation process in South Africa (which has recently adopted inflation targeting), including the exchange rate, consumer prices, producer price, and import prices. This provides useful information on the speed and extent of exchange rate pass-through, and illuminates the various channels through which monetary policy influences inflation. The model is in the tradition of central bank models of the inflation process, but carefully tests for asymmetries, structural breaks and expectations effects, and applies a range of econometric tests and methods to refute the charge that suchmodels necessarily impose ‘incredible’ restrictions, Sims (1980). SUGGESTED CITATION: Janine Aron, John N.J. Muellbauer, and Benjamin W. Smit, "A Structural Model of the Inflation Process in South Africa " (May 29, 2004). The Centre for the Study of African Economies Working Paper Series. Working Paper 208. http://www.bepress.com/csae/paper208