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The South African Phillips Curve: How Applicable Is The Gordon Model?

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  • P. Burger
  • M. Marinkov

Abstract

Is there a Phillips curve relationship present in South Africa and if so, what form does it take? Traditionally the method to establish whether or not there is a relationship between the output gap and the change in inflation is merely to regress the latter on the former. This yields the well-known augmented Phillips curve. However, Gordon has argued that this specification of the Phillips curve produces biased results. Instead, he puts forward and estimates successfully for several industrialised countries his so-called triangular model that tests for hysteresis and inertia in the behaviour of inflation, as well as the impact on inflation of changes in the output level. This paper considers whether or not Gordon's triangle model is applicable to South Africa, i.e. are hysteresis and inertia present in South Africa? In addition, in an attempt to find a better estimation of the output gap, the paper also experiments with alternative ways to estimate the long-run output level, including the standard HP-filter, as well as a production function approach. Copyright (c) 2006 The Authors. Journal compilation (c) 2006 Economic Society of South Africa.

Suggested Citation

  • P. Burger & M. Marinkov, 2006. "The South African Phillips Curve: How Applicable Is The Gordon Model?," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 172-189, June.
  • Handle: RePEc:bla:sajeco:v:74:y:2006:i:2:p:172-189
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    References listed on IDEAS

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    1. Vivek B. Arora & Ashok Bhundia, 2003. "Potential Output and total Factor Productivity Growth in Post-Apartheid South Africa," IMF Working Papers 03/178, International Monetary Fund.
    2. Kevin S. Nell, 2000. "Is Low Inflation a Precondition for Faster Growth? The Case of South Africa," Studies in Economics 0011, School of Economics, University of Kent.
    3. Andreas Billmeier, 2004. "Ghostbusting; Which Output Gap Measure Really Matters?," IMF Working Papers 04/146, International Monetary Fund.
    4. Lowell E. Gallaway & Rajindar K. Koshal & Gene L. Chapin, 1970. "The Relationship Between the Rate of Change in Money Wage Rates and Unemployment Levels in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 38(4), pages 262-267, December.
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    Citations

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    Cited by:

    1. Stan du Plessis & Ben Smit & Federico Sturzenegger, 2007. "Identifying aggregate supply and demand shocks in South Africa," Working Papers 11/2007, Stellenbosch University, Department of Economics.
    2. Temitope Leshoro & Umakrishnan Kollamparambil, 2016. "Inflation Or Output Targeting? Monetary Policy Appropriateness In South Africa," PSL Quarterly Review, Economia civile, vol. 69(276), pages 77-104.
    3. Stan du Plessis & Ben Smit & Federico Sturzenegger, 2008. "Identifying Aggregate Supply and Demand Shocks in South Africa †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(5), pages 765-793, November.
    4. repec:spr:jqecon:v:15:y:2017:i:3:d:10.1007_s40953-016-0059-y is not listed on IDEAS
    5. Phiri, Andrew, 2015. "Examining asymmetric effects in the South African Philips curve: Evidence from logistic smooth transition regression (LSTR) models," MPRA Paper 64487, University Library of Munich, Germany.
    6. Rangan Gupta & Josine Uwilingiye, 2010. "Dynamic Time Inconsistency And The South African Reserve Bank," South African Journal of Economics, Economic Society of South Africa, vol. 78(1), pages 76-88, March.
    7. Andrew Phiri, 2014. "Nonlinear Co-Integration Between Unemployment and Economic Growth in South Africa," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(4 (Winter), pages 303-324.
    8. Phiri, Andrew, 2014. "Re-evaluating Okun's law in South Africa: A nonlinear co-integration approach," MPRA Paper 57398, University Library of Munich, Germany.
    9. Philippe Burger, 2014. "Inflation and Market Uncertainty in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 82(4), pages 583-602, December.
    10. Bonga-Bonga, Lumengo & Lebese, Ntsakeseni Letitia, 2016. "Rethinking the current inflation target range in South Africa," MPRA Paper 73912, University Library of Munich, Germany.
    11. Phiri, Andrew, 2016. "Changes in inflation persistence prior and subsequent to the subprime crisis: What are the implications for South Africa?," MPRA Paper 70645, University Library of Munich, Germany.

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