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Dynamic Impact of Money Supply on Economic Growth in South Africa. An ARDL Approach

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  • Dingela, Siyasanga
  • Khobai, Hlalefang

Abstract

ABSTRACT: This study investigates the dynamic impact of broad money supply (m3) on economic growth (GDP) per capita in South Africa using time-series data from 1980 to 2016. The study has employed the autoregressive distributed lag (ARDL)-bounds testing approach to cointegration and error correction model to investigate the impact of m3 on GDP per capita. The model is specified with four macroeconomics variables, namely, Gross Domestic Product (GDP) per capita, Broad money supply (M3), Interest rate (INT), Inflation rate (INF). The findings reveal that there is statistically significant positive relationship between money supply and economic growth both in short run and long run. The government of South Africa should maintain consistency and follow “the Taylor rule” to allow money supply to increase at a steady rate keeping pace with the economic growth. In respect to such rule will help South Africa Reserve Bank to avoid the inefficiencies that caused by execution of discretionary policy.

Suggested Citation

  • Dingela, Siyasanga & Khobai, Hlalefang, 2017. "Dynamic Impact of Money Supply on Economic Growth in South Africa. An ARDL Approach," MPRA Paper 82539, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82539
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    References listed on IDEAS

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    Cited by:

    1. Nouran Hussein & Jasmin Fouad, 2020. "When the Art of Macroeconomic Management Confronts the Evolution of Business Cycles: Zooming into the Egyptian Case," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 8(1), pages 11-34, May.
    2. Asma Awan & Hafiz Khalil Ahmad & Altaf Hussain & Muhammad Yousuf Khan Marri, 2021. "Prices, Money Supply and Output Nexus in Pakistan – A Macro Econometric Model," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(2), pages 38-77, September.
    3. Hicham Ayad, 2020. "Money Supply, Inflation and Economic Growth: Co-Integration and Causality Analysis," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 65(2), pages 29-45, August.

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    More about this item

    Keywords

    Keywords: Economic growth; Money supply; Inflation rate; Interest rate; Autoregressive Distributed Lag (ARDL).;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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