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Inflation, Money Demand, and Purchasing Power Parity in South Africa

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  • Gunnar Jonsson
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    Abstract

    This empirical study for South Africa indicates that there exists a stable money demand type of relationship among domestic prices, broad money, real income, and interest rates, as well as a long-run relationship among domestic prices, foreign prices, and the nominal exchange rate. In the short run, shocks to the nominal exchange rate affect domestic prices but have virtually no impact on real output, while shocks to broad money have a temporary impact on real output before becoming inflationary. Both types of shocks seem to trigger a monetary policy response, since the short-term interest rate adjusts quickly.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/122.

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    Length: 28
    Date of creation: 01 Sep 1999
    Date of revision:
    Handle: RePEc:imf:imfwpa:99/122

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    Cited by:
    1. Aron, Janine & Muellbauer, John, 2002. "Interest Rate Effects on Output: Evidence from a GDP Forecasting Model for South Africa," CEPR Discussion Papers 3595, C.E.P.R. Discussion Papers.
    2. Pelipas, Igor, 2006. "Money demand and inflation in Belarus: Evidence from cointegrated VAR," Research in International Business and Finance, Elsevier, vol. 20(2), pages 200-214, June.
    3. Jeannine Bailliu & Daniel Garc├ęs & Mark Kruger & Miguel Messmacher, 2003. "Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico," Working Papers 03-17, Bank of Canada.
    4. Domac, Ilker, 2004. "Explaining and forecasting inflation in Tukey," Policy Research Working Paper Series 3287, The World Bank.
    5. Bogdan Lissovolik, 2003. "Determinants of Inflation in a Transition Economy," IMF Working Papers 03/126, International Monetary Fund.
    6. M S Mohanty & Marc Klau, 2001. "What determines inflation in emerging market economies?," BIS Papers chapters, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 1-38 Bank for International Settlements.
    7. Emilio Sacerdoti & Yuan Xiao, 2001. "Inflation Dynamics in Madagascar, 1971-2000," IMF Working Papers 01/168, International Monetary Fund.

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