A comparative study of the inflationary policies of Australia, Chile, Germany, New Zealand, South Africa and the United States of America

Henry, Heather L. (Heather Lynn) (2003-03)

Thesis (MBA)--Stellenbosch University, 2003.

Some digitised pages may appear illegible due to the condition of the original hard copy

Thesis

ENGLISH ABSTRACT: Since 1989 an increasing number of countries have introduced inflation targeting as a monetary policy and many of them have achieved great success. This apparent success has led some to speculate that inflation targets might also be desirable for countries at somewhat lower stages of economic development, including South Africa. The idea of an inflation target for South Africa has, in fact drawn growing support as a practical response to the increasing difficulty of monetary targeting with a liberalised capital account and was implemented in the country on 23 February 2000. Inflation targeting makes the exchange rate less flexible in response to foreign shocks and thus lessens the automatic stabilisation provided by flexible exchange rates. There is some argument to suggest that South Africa may not be a good candidate for an inflation target relative to other countries that have introduced similar policies because of the relative importance of foreign shocks and the weak linkage between monetary policy and inflation. The study of both developing iand developed countries and also countries with and without explicit inflation targeting policies has shown that there is no evidence to substantiate that South Africa should have less success at curtailing inflation through the adoption of inflation targeting. The study explores the economic history and tradition of each of the evaluated countries, namely Australia, Chile, Germany, New Zealand, South Africa and the United States of America, with specific reference to the history and cause of inflation. It is summarised for each individual country based on the policy or approach that the country has adopted and the apparent success thereof.

AFRIKAANSE OPSOMMING: Vanaf 1989 het al hoe meer lande inflasie mikpunte as deel van hul monetêre beleid ingestel en baie van hulle het groot sukses behaal. Hierdie klaarblyklike sukses het ander daarnatoe gelei om te glo dat inflasieteikens ook van belang in minder ontwikkelde lande, Suid- Afrika ingesluit, mag wees. Die konsep van inflasiemikpunte het inteendeel positiewe reaksie uitgelok as 'n potensiële antwoord op toenemende moeilike valute teikens en is in Suid- Afrika vanaf 23 Februarie 2000 toegepas. Inflasieteikens veroorsaak dat wisselkoerse weens buitelandse ekonomiese skokke minder buigbaar is, dit verlaag dus die outomatiese stabiliteit wat buigbare wisselkoerse voorsien. Daar word gesê dat Suid- Afrika, in vergelyking met ander lande, wat die beleid alreeds toegepas het, nie 'n goeie kandidaat is vir inflasieteikens is nie weens die belangrikheid van buitelandse skokke en die swak koppeling tussen monetêre beleid en inflasie. Hierdie studie, wat beide ontwikkelde en ontwikkelende lande, met of sonder formele inflasieteikens, ondersoek, dui aan dat daar geen bewys is dat Suid- Afrika minder sukses kan behaal deur die toepasssing van formele inflasieteikens nie. Die studie is gemik daarop om die ekonomiese geskiedenis en tradisie van elk van die bespreekte lande, naamlik, Australië, Chile, Duitsland, Nieu- Seeland, Suid- Afrika en die VSA te ondersoek, met spesifieke verwysing na die geskiedenis en oorsaak van inflasie in daardie lande. Elke land word volgens die beleid of benadering wat toegepas is, en die klaarblyklikr sukses daarvan, opgesom.

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