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Purpose: This paper aims to examine the asymmetric effects of exchange rate shocks on inflation for a small open economy, namely South Africa, over the period 1970Q1–2020Q1. Design/methodology/approach: A threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using the Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of exchange rate shocks on inflation depending on their size, sign and timing to the inflation cycle. The authors also employed a Cholesky decomposition identification scheme to identify exchange rate shocks in the non-linear model. Findings: The results show that there is a non-linearity effect of the exchange rate shock on inflation. In particular, the effects of 1 or 2 standard deviations of positive (appreciation) or negative (depreciation) exchange rate shock on inflation are small in the long run but a bit larger in the high inflation regime than the low inflation regime. Originality/value: This paper contributes to the literature on the non-linear effects of exchange rate pass-through (ERPT) to inflation for Sub-Saharan African economies in general and the South African economy in particular by incorporating the size and timing of the exchange rate shocks to the inflation cycle. [ABSTRACT FROM AUTHOR]

This paper estimates the exchange rate and oil price pass‐through to South African domestic prices (ERPT and OPPT, respectively). This study adopts a novel approach to compute pass‐through coefficients along the pricing channel using the time‐varying responses of the time‐varying parameter (TVP)‐VAR model. Our findings show that both ERPT and OPPT are incomplete, despite varying responses to local and global economic events that cause fluctuations in the exchange rate and oil prices. The ERPT coefficients have peaked in 1998 and 2001, coinciding with the crisis that caused the excessive depreciation of the domestic currency. The OPPT coefficients, on the other hand, reach their maximum effect during the 2008 global financial crisis. Our findings do not reveal a significant decline in ERPT compared with the 1980s. In contrast to a significant first‐stage effect, the direct ERPT and OPPT coefficients are found to be insignificant. The findings also show that direct OPPT to consumer fuel prices is significantly higher than that of import prices. [ABSTRACT FROM AUTHOR]

This paper investigates the exchange rate pass-through to producer prices in South African industries from 1970 to 2016. Empirical results from panel contemporaneous techniques indicate that exchange rate pass-through to South African producer prices is contingent on the currency choice with substantial variations across industries. Particularly, Rand variations with the currency of Germany, Japan, and the US pose greater influence on the producer prices of South African industries whilst the Chinese and Indian currency variations have the least bearing. The mining and quarrying; the manufacturing and the construction industries are among the sectors that are most exposed to the exchange rate fluctuations. The less pass-through effect occurs in three sectors, namely trade, catering and accommodation services; electricity, gas and water; and transport, storage and communication. This possibly indicates their limited exposure to external shocks. [ABSTRACT FROM AUTHOR]

This paper analyses the exchange rate pass‐through (ERPT) into domestic consumer prices in BRICS (Brazil, Russia, India, China and South Africa) countries from mid‐1990s onwards by using three different econometric approaches (i.e., the single equation approach, the VAR approach and the time‐varying parameter approach). It is also studied the role of macroeconomic determinants in ERPT. Our results suggest that (a) ERPT is higher for the emerging markets with mostly floating exchange rates (Brazil, Russia and South Africa) than for the other BRICS countries; (b) exchange rate explains, on average, around the 40% of the price variance for Brazil, Russia and South Africa; and (c) inflation volatility, exchange rate volatility and openness seem to be the key macroeconomic determinants in BRICS countries. [ABSTRACT FROM AUTHOR]

This study estimates pass-through for South Africa using samples of final goods and services, and homogenous imports. Estimated pass-through to consumer goods prices is low, roughly 16 per cent in the two years following an exchange rate change; surprisingly, it is somewhat higher for services. Deviations from long run PPP appear to disappear relatively quickly, with a half-life of about 16 months. For imports, pass-through estimates are much higher, averaging around 60 per cent, but with wide source-country variation. Finally, there is virtually no support for a simple linear trend change in either pass-through or in reversion to PPP during the sample. [ABSTRACT FROM PUBLISHER]

This paper examines the magnitude and speed of exchange rate pass-through (ERPT) to import prices in South Africa. It further explores whether the direction and size of changes in the exchange rate have different pass-through effects on import prices, i.e. whether the exchange rate pass-through is symmetric or asymmetric. The findings of the study suggest that ERPT in South Africa is incomplete but relatively high. Furthermore, ERPT is found to be higher in periods of rand depreciation than appreciation, which supports the binding quantity constraint theory. There is also evidence to suggest that pass-through is slightly higher in periods of small changes than large changes in the exchange rate in harmony with the menu cost theory when the invoices are denominated in the exporters' currency. [ABSTRACT FROM AUTHOR]