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Comparing South African Inflation Volatility Across Monetary Policy Regimes: An Application Of Saphe Cracking

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • Josine Uwilingiye

    (Department of Economics, University of Pretoria)

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.

Suggested Citation

  • Rangan Gupta & Josine Uwilingiye, 2009. "Comparing South African Inflation Volatility Across Monetary Policy Regimes: An Application Of Saphe Cracking," Working Papers 200906, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:200906
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    Cited by:

    1. Chevaughn van der Westhuizen & Renee van Eyden & Goodness C. Aye, 2022. "Is Inflation Uncertainty a Self-Fulfilling Prophecy? The Inflation-Inflation Uncertainty Nexus and Inflation Targeting in South Africa," Working Papers 202254, University of Pretoria, Department of Economics.
    2. Giorgio Canarella & Stephen M Miller, 2017. "Inflation Persistence Before and After Inflation Targeting: A Fractional Integration Approach," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 78-103, January.
    3. Giorgio Canarella & Stephen M. Miller, 2016. "Inflation Persistence and Structural Breaks: The Experience of Inflation Targeting Countries and the US," Working papers 2016-21, University of Connecticut, Department of Economics.
    4. Nikolaos Antonakakis & Christina Christou & Luis A. Gil-Alana & Rangan Gupta, 2020. "Inflation-Targeting and Inflation Volatility: International Evidence from the Cosine-Squared Cepstrum," Working Papers 202021, University of Pretoria, Department of Economics.
    5. Nikolaos Antonakakis & Christina Christou & Luis A. Gil-Alana & Rangan Gupta, 2021. "Inflation-targeting and inflation volatility: International evidence from the cosine-squared cepstrum," International Economics, CEPII research center, issue 167, pages 29-38.
    6. Franz Ruch & Dirk Bester, 2013. "Towards a Measure of Core Inflation using Singular Spectrum Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 81(3), pages 307-329, September.
    7. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta, 2020. "The Effectiveness Of Monetary Policy In South Africa Under Inflation Targeting: Evidence from a Time-Varying Factor-Augmented Vector Autoregressive Model," Journal of Developing Areas, Tennessee State University, College of Business, vol. 54(4), pages 55-73, October-D.
    8. Mehmet Balcilar & Rangan Gupta & Charl Jooste, 2016. "Analyzing South Africa’s inflation persistence using an ARFIMA model with Markov-switching fractional differencing parameter," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(1), pages 47-57, January-M.
    9. Amusa, Kafayat & Gupta, Rangan & Karolia, Shaakira & Simo-Kengne, Beatrice D., 2013. "The long-run impact of inflation in South Africa," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 798-812.

    More about this item

    Keywords

    Cosine-Squared Cepstrum; Inflation Targeting; Inflation Volatility; Saphe Cracking;
    All these keywords.

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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