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COMPARING SOUTH AFRICAN INFLATION VOLATILITY ACROSS MONETARY POLICY REGIMES: AN APPLICATION OF SAPHE CRACKING

Rangan Gupta () and Josine Uwilingiye

No 200906, Working Papers from University of Pretoria, Department of Economics

Abstract: Recent empirical evidence on the direct link of inflation targeting and inflation volatility is at best mixed. However, comparing inflation volatility across alternative monetary policy regimes within a country based on conventional ways, used in previous studies, begs the question. The question is not whether the volatility of inflation has changed, but rather whether the volatility is different than it otherwise would have been. In such a backdrop, this paper uses the cosine-squared cepstrum to provide evidence that CPI inflation in South Africa has become more volatile since the first quarter of 2000, when the country moved into an inflation targeting regime, than it would have been had the South African Reserve Bank (SARB) continued with the more eclectic monetary policy approach pursued in the pre-targeting era.

Keywords: Cosine-Squared Cepstrum; Inflation Targeting; Inflation Volatility; Saphe Cracking (search for similar items in EconPapers)
JEL-codes: C65 E42 E52 E64 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2009-02
New Economics Papers: this item is included in nep-afr, nep-cba, nep-mac and nep-mon
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Journal Article: Comparing South African Inflation Volatility Across Monetary Policy Regimes: An Application of Saphe Cracking (2012) Downloads
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