Exchange Rate Pass-Through to Consumer Prices in South Africa: Evidence from Micro-Data

Abstract:

A sizeable literature examines exchange rate pass-through to disaggregated import prices, but few micro-studies focus on consumer prices. This article explores exchange rate pass-through to consumer prices in South Africa, for 2002–2007, using a unique data set of highly disaggregated data at the product and outlet level. The empirical approach allows pass-through to be calculated over various horizons for different goods and services. The heterogeneity of pass-through for food sub-components is considerable. Switches between import and export parity pricing of maize are found significant for five out of ten food sub-components. Using actual weights from the CPI basket, overall pass-through to the almost 63 per cent of the CPI covered is about 30 per cent after two years, and higher for food.