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Working Paper - 216 - Inflation Targeting Monetary Policy, Inflation Volatility and Economic Growth in South Africa


This paper investigates the impact of inflation targeting monetary policy and inflation volatility on economic growth in South Africa. Until at least the early 1970s, monetary policy was regarded as ineffective in controlling inflation. Governments relied on fiscal policy to stabilize the economy and keep inflation low. However, beginning in mid-1970s monetary authorities in advanced economies attempted to control inflation using monetary aggregates (M3, M2 or M1) with some success. Nonetheless, the instability between monetary targeting and goal variables (inflation and income) made this approach problematic. With such problems with monetary targeting in 1970s and 1980s, advanced economies shifted to inflation targeting in early 1990s.

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