South Africa

South Africa initially fixed and then managed its exchange rate, with a process of financial liberalisation facilitating the adoption of inflation targets in 2002.

Years Targets and attainment Classification
1974-78 exchange rate pegged to USD for 6 months, managed for 12 and then repegged to USD, with devaluation September 1975; more fix than target, with narrow margins set by central bank; monetary policy instruments mainly direct augmented exchange rate fix AERF
1979-2002 managed float of exchange rate; gradual liberalisation through 1980s makes monetary policy instruments more indirect and brings fiscal dominance under control; monetary targets 1986-9, missed 3 years out of 4, authorities insist on objectives other than inflation; central bank made independent in 1996 constitution; from 1998 new repo-based interest rate operations and authorities looking to move to formal inflation targeting, which starts 2002 with large overshoot loosely structured discretion
2003-17 wide inflation targets met or nearly met (typically around top of band) except 2008-9; 2-year ahead inflation expectations seem to have exceeded top of band in 2008 but since then have remained consistently around top of band loose inflation targeting LIT

Selected IMF references: RED 1978 pp42-6; RED 1980 pp61-2; RED 1983 pp43-6; RED 1988 pp57-9; RED 1989 pp41-3; SR 1989 p20-21; SI 1998 pp25-6; SR 1998 p30; SR 2011 p16; SR 2014 p38; SR 2016 p41; SR 2018 pp35-6, 80-86.

Additional sources: Stals (2011); Aron and Muellbauer (2006).

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