Data
sets
utilised
in
the
study


Together with the previous Chapters’ findings on the frequency and magnitude of price changes for the CPI and PPI data sets, the following times series data were used in the study:

• Consumer Prices for metropolitan and other urban areas (South African Reserve Bank time series 7112A);

• Nominal Effective Exchange Rate of the Rand (South African Reserve Bank time series 5376M)

• Repurchase rate or Repo rate, the key policy interest rate used by the South African authorities

In Fig. 21, the relevant descriptive statistics for the CPI-related data are presented, providing an overview of the movements in the frequency of price changes, price increases and price decreases revealed in the CPI microdata study along with changes in the level of the CPI, the nominal effective exchange rate and the Repo rate. The use of 12 month moving averages for the various series assists in smoothing the data and makes it easier to compare overall trends in the data.

In Fig. 21, the descriptive data reveal a number of empirical propositions, which are later in this Chapter broadly confirmed through regression analysis:

- there is a positive association between the frequency of price changes and price increases and the rate of inflation, that is, a rise (fall) in the rate of inflation is associated with a rise (fall) in the frequency of price changes and price increases; - there is a positive association between the frequency of price changes and price

increases and the Repo rate, that is, a rise (fall) in the Repo rate is associated with a rise (fall) in the frequency of price changes and price increases

- there is a negative association between the frequency of price changes and price increases and the nominal effective exchange rate, that is, an appreciation (fall) in the exchange rate is associated with a fall (rise) in the frequency of price changes and price increases; and

Fig.21 Frequency of price changes, the inflation rate, the exchange rate and the Repo rate (with 12 month moving average)

Source: SARB CPI data series 7112A, Nominal Effective Exchange rate 5376M, Repo Rate

Fig.
22
shows
the
time
series
relationship
between
the
magnitudes
of
price
changes,
 price
increases
and
price
decreases
revealed
in
the
CPI
microdata
study,
along
with
 changes
in
the
level
of
CPI,
the
nominal
effective
exchange
rate
and
the
Repo
rate.




Fig. 22 Magnitude of price changes, the inflation rate, the exchange rate and the Repo rate (with 12 month moving average)

Source: SARB CPI data series 7112A, Nominal Effective Exchange rate 5376M, Repo Rate

Again,
the
use
of
12 month moving averages for the various series assists in smoothing the data and makes it easier to compare overall trends in the data. In this case, the

Fig. 23 Frequency of PPI price changes, the inflation rate, the exchange rate and the Repo rate (with 12 month moving average)

Source: SARB PPI data series 7140A, Nominal Effective Exchange rate 5376M, Repo Rate

changes, price increases and price decreases and the macroeconomic variables included in the study, although certain statistically significant relationships between the magnitude

of price changes and the macroeconomic variables are shown in the regression analysis later in the Chapter.

In Fig. 23, descriptive statistics are presented for the PPI data set, including the frequency and magnitude of price changes revealed in the PPI microdata study, as well as changes in the level of PPI, the nominal effective exchange rate and the Repo rate.

The findings are similar to those for the CPI-related data, most of which are borne out by the regression analysis that follows:

- there is a positive association between the frequency of price changes and price increases and the rate of inflation;

- there is a positive association between the frequency of price changes and price increases and the Repo rate;

- there is a negative association between the frequency of price changes and price increases and the nominal effective exchange rate; and

- no clear associations are evident for the frequency of price decreases.

Fig. 24 outlines the magnitude of PPI price changes and the various macroeconomic variables. Again the data does not reveal clear associations between the price change magnitudes and the macroeconomic variables included in the study, although certain statistically significant relationships between the magnitude of price changes and the macroeconomic variables are shown in the regression analysis later in the Chapter.

Fig. 24 Magnitude of PPI price changes, the inflation rate, the exchange rate and the Repo rate (with 12 month moving average)

Source: SARB PPI data series 7140A, Nominal Effective Exchange rate 5376M, Repo Rate

In the following section, a regression model is outlined which will be used to analyse whether any statistically significant relationships might exist between the various time series data. In particular, the question is asked as to whether there is any evidence of

seasonality in the frequency and magnitude of price changes in the CPI and PPI microdata, and whether any statistically significant associations can be found between pricing conduct and aggregate macroeconomic variables, such as, the inflation rate, the nominal effective exchange rate and the Repo rate, in real time and after a three-month lag.