An examination of the pass-through from exchange rate to inflation in South Africa

This study examined the exchange-rate-pass-through to import, producer and consumer prices in South Africa using quarterly data covering the period 2000 to 2015. The study made use of panel data techniques to examine the degree of pass-through to import prices, producer prices as well consumer prices. The Hausman test indicated fixed effects (FE) as the correct model for the data. In order to correct for errors and get a more robust model, the least squares dummy variable (LSDV) model was estimated. The key findings claim that the exchange rate is negative and weakly significant to explain South African prices. It was highest for producer prices, followed by import prices and lowest at consumer prices. The findings have implications for policy and theory