SciELO - Scientific Electronic Library Online

vol.11 issue2Bank lending, expenditure components and inflation in South Africa: Assessment from bounds testing approach author indexsubject indexarticles search
Home Pagealphabetic serial listing  

South African Journal of Economic and Management Sciences

On-line version ISSN 2222-3436
Print version ISSN 1015-8812


ROSSOUW, Jannie  and  PADAYACHEE, Vishnu. South African price changes and inflation since 1974: A note on the testing of inflation accuracy. S. Afr. j. econ. manag. sci. [online]. 2008, vol.11, n.2, pp.229-246. ISSN 2222-3436.

As inflation credibility in South Africa records low readings when measured in terms of inflation credibility barometers, this note aims at assessing whether actual price movements provide any grounds for low inflation credibility. It compares the price movements of similar items with the rate of inflation over a period of 32 years, i.e. from 1974 to 2006, and discusses the use of an inflation accuracy indicator to compare estimated price levels adjusted by the rate of inflation and actual price levels. Over the period of comparison no systematic over- or under-reporting of changes in prices in terms of the rate of inflation could be detected and the analysis suggests that little or no basis can be found to justify low inflation credibility. Inflation credibility is more likely than not influenced by the most recent purchasing experiences of consumers. Doubts concerning the accuracy of inflation figures could nevertheless result in the general public concluding that monetary policy aiming at the achievement of an inflation target brings only the pain of high interest rates without the tangible benefits of lower inflation, thereby jeopardising the usefulness of an inflation-targeting monetary policy framework.

        · text in English     · English ( pdf )


Creative Commons License All the contents of this journal, except where otherwise noted, is licensed under a Creative Commons Attribution License