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Inflation and growth in South Africa


  • D. Hodge


This paper studies the relationship between inflation and growth in South Africa. Two main issues are addressed: do tests of the South African data support the findings of cross-section studies that inflation has a negative effect on growth over the longer term? and, can higher growth be gained at the cost of higher inflation in the short run? The findings are that inflation drags down growth in South Africa over the longer term, and that, in the short run, growth above its trend requires accelerating inflation. Thus, for growth to be pulled substantially above its present low trend, inflation targeting in South Africa would have to be abandoned. However, this would be counterproductive over the longer term, once the negative relationship between inflation and growth manifests itself. Copyright 2006, Oxford University Press.

Suggested Citation

  • D. Hodge, 2006. "Inflation and growth in South Africa," Cambridge Journal of Economics, Oxford University Press, vol. 30(2), pages 163-180, March.
  • Handle: RePEc:oup:cambje:v:30:y:2006:i:2:p:163-180

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    Cited by:

    1. N. Mhlaba & A. Phiri, 2019. "Is public debt harmful towards economic growth? New evidence from South Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1603653-160, January.
    2. Mavikela Nomahlubi & Mhaka Simba & Phiri Andrew, 2019. "The Inflation-Growth Relationship in SSA Inflation-Targeting Countries," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 64(2), pages 84-102, August.
    3. Audrey Liwan & Evan Lau, 2007. "Managing Growth: The Role of Export, Inflation and Investment in Three ASEAN Neighboring Countries," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(4), pages 7-16, November.
    4. Valli, Mohammed & Masih, Mansur, 2014. "Is there any causality between inflation and FDI in an ‘inflation targeting’ regime? Evidence from South Africa," MPRA Paper 60246, University Library of Munich, Germany.
    5. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    6. Duncan Hodge, 2009. "Growth, Employment And Unemployment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 77(4), pages 488-504, December.
    7. Kiliç, Cuneyt & Arica, Feyza, 2014. "Economic Freedom, Inflation Rate and their Impact on Economic Growth: A Panel Data Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 160-176, March.
    8. O. S. Yaya & O. J. Akintande & A. E. Ogbonna & H. M. Adegoke, 2019. "Cpi Inflation In Africa: Fractional Persistence, Mean Reversion And Nonlinearity," Statistics in Transition New Series, Polish Statistical Association, vol. 20(3), pages 119-132, September.
    9. Luxolo Malangeni & Andrew Phiri, 2018. "Education and Economic Growth in Post-apartheid South Africa: An Autoregressive Distributive Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 101-107.
    10. İlyas Şiklar & Merve Kocaman, 2018. "FDI and Macroeconomic Stability: The Turkish Case," European Financial and Accounting Journal, University of Economics, Prague, vol. 2018(1), pages 19-40.
    11. repec:exl:29stat:v:20:y:2019:i:3:p:119- is not listed on IDEAS
    12. Mapapu, Babalwa & Phiri, Andrew, 2017. "Carbon emissions and economic growth in South Africa: A quantile regression approach," MPRA Paper 81801, University Library of Munich, Germany.
    13. Seleteng, Monaheng & Bittencourt, Manoel & van Eyden, Reneé, 2013. "Non-linearities in inflation–growth nexus in the SADC region: A panel smooth transition regression approach," Economic Modelling, Elsevier, vol. 30(C), pages 149-156.
    14. MALEFANE , Malefa Rose & ODHIAMBO, Nicholas M., 2018. "Impact of Trade Openness on Economic Growth: Empirical Evidence from South Africa," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(4), pages 387-416.
    15. James Heintz & Léonce Ndikumana, 2010. "Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa?," Working Papers wp218, Political Economy Research Institute, University of Massachusetts at Amherst.

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