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Evaluating the Effects of Inflation on Economic Growth in South Africa

Author

Listed:
  • Fabian MOODLEY
  • Surendran PILLAY

    (North-West University
    University of KwaZulu Natal)

Abstract

This study investigates interaction between inflation and economic growth in South Africa during 1970-2021 periods. Utilizing Autoregressive Distributed Lag (ARDL) model, it finds that inflation, long-term interest rate and money supply have negatively impact on South African economic growth. Furthermore, the study conducts causality tests which reveal a bidirectional relationship between money supply and South African economic growth. On the other hand, it documents a unidirectional causality running from inflation to economic growth and from long-term interest rate to economic growth. The study found no causal relationship between real effective exchange rate and South African economic growth. As a result, the study recommends a more aggressive inflation targeting policy in order to improve economic growth in South Africa.

Suggested Citation

  • Fabian MOODLEY & Surendran PILLAY, 2024. "Evaluating the Effects of Inflation on Economic Growth in South Africa," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 8(2), pages 69-87.
    • Handle: RePEc:trp:01jefa:jefa0077
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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