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Structural estimates of the South African sacrifice ratio

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  • Hayelom Yrgaw Gereziher
  • Naser Yenus Nuru

Abstract

This paper estimates the output cost of fighting inflation—the sacrifice ratio—for the South African economy using quarterly data spanning the period 1998:1–2019:3. To compute the sacrifice ratio, the structural vector autoregressive (SVAR) model developed by Cecchetti and Rich (2001) based on Cecchetti (1994) is employed. Our findings show us a small sacrifice ratio, which lies within the range 0.00002–0.231 percent with an average of 0.031 percent, indicating a low level of output to be sacrificed while fighting inflation. Hence, the reserve bank is recommended to sustain an inflation rate within the target range and reap the benefits of a predictable and stable price path, as restrictive monetary policy has only a transitory effect on real variables like output.

Suggested Citation

  • Hayelom Yrgaw Gereziher & Naser Yenus Nuru, 2024. "Structural estimates of the South African sacrifice ratio," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 48(1), pages 42-61, January.
    • Handle: RePEc:taf:rseexx:v:48:y:2024:i:1:p:42-61
    DOI: 10.1080/03796205.2023.2268296
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