IDEAS home Printed from
   My bibliography  Save this article

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


  • By Gunnar Jonsson

    (International Monetary Fund)


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, as the short-term interest rate adjusts quickly. Copyright 2001, International Monetary Fund

Suggested Citation

  • By Gunnar Jonsson, 2001. "Inflation, Money Demand, and Purchasing Power Parity in South Africa," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 1-2.
  • Handle: RePEc:pal:imfstp:v:48:y:2001:i:2:p:2

    Download full text from publisher

    File URL:
    File Function: main text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-447, May.
    2. Bayoumi, Tamim & Coe, David T. & Helpman, Elhanan, 1999. "R&D spillovers and global growth," Journal of International Economics, Elsevier, vol. 47(2), pages 399-428, April.
    3. Evans, Paul, 1997. "Government Consumption and Growth," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 209-217, April.
    4. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    5. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    6. Easterly, William & King, Robert G & Levine, Ross & Rebelo, Sérgio, 1994. "Policy, Technology Adoption and Growth," CEPR Discussion Papers 957, C.E.P.R. Discussion Papers.
    7. Kocherlakota, Narayana R & Yi, Kei-Mu, 1996. "A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 126-134, February.
    8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-670, Special I.
    10. Feenstra, Robert C. & Madani, Dorsati & Yang, Tzu-Han & Liang, Chi-Yuan, 1999. "Testing endogenous growth in South Korea and Taiwan," Journal of Development Economics, Elsevier, vol. 60(2), pages 317-341, December.
    11. Suzanne McCoskey & Chihwa Kao, 1998. "A residual-based test of the null of cointegration in panel data," Econometric Reviews, Taylor & Francis Journals, vol. 17(1), pages 57-84.
    12. James E. Rauch & Diana Weinhold, 1999. "Openness, Specialization, and Productivity Growth in Less Developed Countries," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 1009-1027, August.
    13. Fabio Canova & Albert Marcet, 1995. "The poor stay poor: Non-convergence across countries and regions," Economics Working Papers 137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
    14. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    15. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    16. Driver, R. & Wren-Lewis, S., 1999. "New Trade Theory and Aggregate Export Equations: an Application of Panel Cointegration," Discussion Papers 9917, Exeter University, Department of Economics.
    17. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
    18. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
    19. repec:exe:wpaper:99/17 is not listed on IDEAS
    20. Barker, Terry S, 1977. "International Trade and Economic Growth: An Alternative to the Neoclassical Approach," Cambridge Journal of Economics, Oxford University Press, vol. 1(2), pages 153-172, June.
    21. Feenstra, Robert C. & Yang, Tzu-Han & Hamilton, Gary G., 1999. "Business groups and product variety in trade: evidence from South Korea, Taiwan and Japan," Journal of International Economics, Elsevier, vol. 48(1), pages 71-100, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Erik Hjalmarsson & Pär Österholm, 2010. "Testing for cointegration using the Johansen methodology when variables are near-integrated: size distortions and partial remedies," Empirical Economics, Springer, vol. 39(1), pages 51-76, August.
    2. Mtonga, Elvis, 2006. "The real exchange rate of the rand and competitiveness of South Africa's trade," MPRA Paper 1192, University Library of Munich, Germany.
    3. Loening, Josef L. & Durevall, Dick & Ayalew Birru, Yohannes, 2009. "Inflation Dynamics and Food Prices in an Agricultural Economy: The Case of Ethiopia," Working Papers in Economics 347, University of Gothenburg, Department of Economics.
    4. Ruthira Naraidoo & Ivan Paya, 2010. "Forecasting Monetary Rules in South Africa," Working Papers 201007, University of Pretoria, Department of Economics.
    5. Goujon, Michael, 2006. "Fighting inflation in a dollarized economy: The case of Vietnam," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 564-581, September.
    6. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta, 2016. "The Effectiveness of Monetary Policy in South Africa under Inflation Targeting: Evidence from a Time-Varying Factor-Augmented Vector Autoregressive Model," Working Papers 201653, University of Pretoria, Department of Economics.
    7. Chevillon, Guillaume, 2009. "Multi-step forecasting in emerging economies: An investigation of the South African GDP," International Journal of Forecasting, Elsevier, vol. 25(3), pages 602-628, July.
    8. Durevall, Dick & Loening, Josef L. & Ayalew Birru, Yohannes, 2013. "Inflation dynamics and food prices in Ethiopia," Journal of Development Economics, Elsevier, vol. 104(C), pages 89-106.
    9. Emmanuel Ziramba, 2007. "Demand For Money And Expenditure Components In South Africa: Assessment From Unrestricted Error-Correction Models," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 412-424, September.
    10. Stephen G. Hall & George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas, 2009. "Where Has All the Money Gone? Wealth and the Demand for Money in South Africa †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(1), pages 84-112, January.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:imfstp:v:48:y:2001:i:2:p:2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.