More on 'Manoel, what are you doing in South Africa?'
From a development economist's perspective this question should be redundant, but let me elaborate on the need for education.
First, the (current) public protector has recently suggested that the constitution of South Africa should be changed, that is, she argues that the mandate of the South African Reserve Bank should be changed so that the Bank can implement policies which will (hopefully) generate economic growth in South Africa. Very honourable, no doubt. But, not terribly sound economics, is it? Of course not!
There is a vast literature suggesting that inflation is bad for growth (to be fair, there is some literature suggesting that 'a bit' of inflation is good for growth, but the public protector does not mention that. More importantly, the inflationary experiences of Germany, Hungary, Israel, South America and Zimbabwe, to mention a few, speak for themselves). Why is inflation bad for growth? Because inflation distorts the price system, erodes the value of the currency and increases macroeconomic uncertainty. A bit cryptic? Okay, because governments that switch on the printing machine (after capturing the central bank) are governments that are losing control of their own finances and the printing machine gives governments access to resources - money - and inflation erodes not only the currency, but also the debt. Well, then we go full circle, right? Of course! South Africa is not growing, and that has an effect on public finances (there are less people investing, less people working, less people paying taxes, and more people on welfare) and switching on the printing machine is always an `easy' solution for a `government that has lost control.' If you want to know more, either attend my lectures, or get yourself a half-decent Macroeconomics textbook and start reading. Education matters, don't you think?
Secondly, recently the deputy finance minister has also argued that inflation targeting is not necessarily good for developing countries. Yes, you read it right, the deputy finance minister thinks that the policy implemented by the (supposedly independent) Reserve Bank is perhaps not good for South Africa (in case he is including South Africa in the 'developing countries' bunch). Why is that so? I don't know, the deputy finance minister apparently never cited any paper on the subject and consequently never elaborated much on the economics behind his reasoning.
Education matters, don't you think?
I am Associate Professor in the Department of Economics at the University of Pretoria, South Africa.