Oil Prices, Exchange Rates, And Inflation Expectations In South Africa

Abstract

Informed inflation expectations facilitate the extemporisation of a proper monetary policy framework that allows for the achievement of economic objectives, among them price stability. This study used the vector autoregression model to assess the impact of crude oil prices and exchange rates on inflation expectations in South Africa. Monthly time-series data for the period July 2002 to March 2013, obtained from the electronic database of the South African Reserve Bank were used. The study obtained statistically significant results suggesting that both crude oil prices and the exchange rates have a positive impact on inflation expectations in South Africa.