Inflation targeting and inflation indicators: The case of inflation targeting in South Africa

Abstract

This paper uses testable effects of each of the inflation indicators to the rate of inflation using econometrics tools to find that they have a long run trend with the rate of inflation in South Africa. Empirical results indicate that each of the indicator variables has a long run relationship with the rate of inflation. The major conclusion is that inflation indicator variables like money supply (M3), oil price, gold price, total employment, interest rates, exchange rates and output growth can be useful inflation indicators in targeting the future trends of inflation in South Africa.