The impact of petrol price movements on South African inflation

Abstract

This paper analyses the impact of petrol price movements on inflation outcomes in South Africa since the mid-1970s. The results show that, over time, the direct contribution of petrol inflation to headline inflation has not only increased, but has also exceeded its weight in the consumer price index. In addition, Granger causality tests and the autoregressive distributed lag approach to co-integration testing reveal that petrol prices have an important bearing on the prices of other (non-petrol) commodities in the economy. The results essentially show that petrol price increases had an important bearing on inflation outcomes in South Africa. This implies that petrol price movements warrant special attention in policy formulation and implementation in South Africa if inflation outcomes were to be kept in check. Keywords: commodity prices, energy prices, inflation, core inflation

Keywords

• commodity prices
• energy prices
• inflation
• core inflation