Evaluating the Effects of Inflation on Economic Growth in South Africa

Fabian Moodley and Surendran Pillay ()
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Surendran Pillay: North-West University

Journal of Economics and Financial Analysis, 2024, vol. 8, issue 2, 69-87

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.

Keywords: Gross Domestic Product; Consumer Price Index; Interest Rate; Money Supply; Exchange Rate; Macroeconomic Policy. (search for similar items in EconPapers)
JEL-codes: E31 E39 (search for similar items in EconPapers)
Date: 2024
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