Macroeconomic effects of lowering South Africa's inflation target: An SVAR analysis

Richard Kima and Keagile Lesame

No wp-2025-106, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: We estimate the macroeconomic effects of shifting to a lower inflation target for South Africa, within a Structural Vector Autoregressive (SVAR) framework identified using the Max Share Identification strategy and estimated with Bayesian methods. We find that a decrease of 1% (in terms of percentage points change) in the inflation target leads to output expanding over the next few quarters after an initial muted response, with a peak of about 1.20% after about two years and remains positive and statistically significant for nearly three years after the shock.

Keywords: Inflation targeting; Macroeconomics; Econometric models (Monetary policy); South Africa (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-ets and nep-mon
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