The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
This Selected Issues paper for South Africa presents a quantitative analysis of inflation dynamics in the country. The conduct of monetary policy has been complicated by a variety of unanticipated events that have had important effects on inflation. Exposed to exchange rate and other shocks, the model confirms that a delayed policy response to inflation shocks leads to persistently higher inflation rates and, subsequently, to a sharp real contraction of the economy.