Endogenous monetary approach to optimal inflation-growth nexus in Swaziland

Andrew Phiri

No 1827, Working Papers from Department of Economics, Nelson Mandela University

Abstract: With the inflation-growth nexus being a hotly debated issue within the academic paradigm, the purpose of our study is to examine the relationship for Swaziland between 1975 and 2016 of which there currently exists very limited country-specific evidence. In the design of our study we theoretically depend on an endogenous monetary model of economic growth augmented with a credit technology which causes a nonlinear relationship between inflation and growth. Econometrically, we rely on the smooth transition regression (STR) which allows us to estimate an optimal inflation rate characterized by smooth transition between different inflation regimes. Our empirical results point to an inflation threshold estimate of 7.64% at which economic growth gains are maximized or similarly growth losses are minimized. In particular, we find that above the inflation threshold economic agents may be able to protect themselves from inflation through credit technology and a more urbanized population yet such high inflation adversely affects the influence of exports on economic growth. This noteworthy since a majority of government revenues is from trade activity via the country’s affiliation with the Southern African Customs Union (SACU). Nevertheless, the major contribution of this paper is that it becomes the first to use endogenous growth theory to estimate the inflation threshold for any African country which will hopefully pave a way for similar studies on other African countries.

Keywords: Inflation; Economic growth; Endogenous monetary growth model; Smooth transition regression; Swaziland; African country. (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 C52 E31 O47 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018-07
New Economics Papers: this item is included in nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1827.pdf First version, 2018 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Internal Server Error

Related works:
Journal Article: Endogenous monetary approach to optimal inflation–growth nexus in Swaziland (2020)
Working Paper: Endogenous monetary approach to optimal inflation-growth nexus in Swaziland (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnd:wpaper:1827

Access Statistics for this paper

More papers in Working Papers from Department of Economics, Nelson Mandela University Contact information at EDIRC.
Bibliographic data for series maintained by Andrew Phiri ().