Inflation targeting anchors inflation expectations, which are not within the sphere of control of the authorities, but can only be influenced over time by consistent policy. As public distrust of inflation figures will feed through to inflation expectations, this paper highlights pilot studies measuring the credibility of inflation in terms of an inflation credibility barometer. Despite initial discouraging results, the conclusion is that knowledge and information improve the credibility of inflation, but only one inflation rate (ideally the one used for inflation targeting purposes) should be communicated. Moreover, the rate used for targeting purposes should be specified with ease of communication in mind.
We propose a comparison between atheoretical and theoretical models in forecasting the
inflation rate for an inflation-targeting country such as South Africa. In a pseudo real-time
environment, our results show that for ...
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 ...
Rossouw, Jannie; Padayachee, Vishnu; Bosch, Adel(University of Pretoria, 2011-05)
This paper reports a comparison of South African household inflation expectations and inflation credibility
surveys undertaken in 2006 and 2008. It tests for possible feed-through between inflation credibility and