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| Title: | Evaluating the SARB's inflation target |
| Author: | Du Plessis, S.A. |
| Year: | 2002 |
| Periodical: | South African Journal of Economics |
| Volume: | 70 |
| Issue: | 6 |
| Pages: | 982-1007 |
| Language: | English |
| Geographic term: | South Africa |
| Subjects: | central banks monetary policy inflation |
| External link: | https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2002.tb00054.x/pdf |
| Abstract: | The South African Reserve Bank (SARB) cannot target its ultimate goal, the observed inflation rate in South Africa, but only the SARB's conditional forecast of where inflation is expected to be when the full effect of monetary policy arrives. Nevertheless, the SARB has agreed to target the observed (or realized) rate of inflation in calendar year 2002. The implementation of this inflation target is problematic, as it blurs the distinction between two dimensions of policy evaluation under inflation targeting, i.e. the (backward looking) evaluation of the policy framework and the (forward looking) evaluation of the stance of policy at any particular point in time. Consequently, the public monitoring of monetary policy is compromised. This paper examines the monetary problem in the SARB's new monetary policy framework and compares it with the literature and international experience with inflation targeting. By distinguishing the forward and backward looking aspects of policy evaluation the SARB could eliminate the monitoring problem and so avoid the potentially significant loss in credibility which inappropriate policy ex ante, or ex post policy failure, could entail. Bibliogr., notes, ref. [ASC Leiden abstract] |
