Abstract
M.Comm.
The overall objective of this study was to determine the appropriateness of Inflation Targeting to South Africa, or of South Africa's suitability for Inflation Targeting. For that reason, I shall produce information that will aid in the determination of whether the South African Reserve Bank has been correct in their adoption of this framework, and to propose an alternative, more all-encompassing option.
The research design used in this study in terms of Tripodi, Fellin and Meyer's (1982:40)
classification can be termed as a hybrid of the exploratory and the quantitative-descriptive
designs.
Chapter 1 introduces the reader to the research paper. This chapter incorporates the rationale and importance of the study, its methodology, hypothesis, limitations, aims, and referencing method. It sets out clear aims and objectives for the thesis while providing an overview of the material. To facilitate the analysis of Inflation Targeting in South Africa it was vital to have a clear and accurate understanding of what Inflation Targeting is. The definition and an analysis of the definition are covered in Chapter 2. As other authors have detailed this aspect voluminously, it is just dealt with summarily in this section. Chapter 3 discusses the requirements for Inflation Targeting as set out by the authorities. These factors are primarily of a technical nature. While the information garnered for this section is invaluable, it is inadequate in isolation. Countries' individual circumstances play an important role, and need to be considered along with the purely technical requirements for Inflation Targeting. This chapter is important in the analysis as it provides an important yardstick for the analysis of the requirements in South Africa.
In order to attain an enhanced grasp of Inflation Targeting and its potential impact and effects on South Africa, it is imperative to take lessons from other countries where the framework has been implemented. Chapter 4 analyses international experiences with Inflation Targeting, with the main aim of learning from the experience of developed and, more importantly, developing nations.
The paper then moves into the most important section: that of South Africa. Once a full
understanding of what Inflation Targeting involves is obtained, both theoretically and
empirically, we are in a position to consider where South Africa fits in. South African monetary policy is evaluated briefly, while the technical requirements of Inflation Targeting are analysed in their South African context. Various problems are discussed with the applicability of the framework to South Africa. The later part of this section analyses technical and socio-political complicating factors, while a description is provided of a suggested alternative framework.
The final chapter concludes that South Africa is, indeed, almost certainly "less than suitable" for Inflation Targeting and suggests that a more holistic framework of a "GEAR-type" nature is more likely to be appropriate to a country with the uniqueness of South Africa.