Journal of Economics and Financial Analysis, 8 (2), pp. 69-87, [2024]
URI: https://ojs.tripaledu.com/jefa/article/view/96/106

Evaluating the Effects of Inflation on Economic Growth in South Africa


North-West University, South Africa


University of KwaZulu Natal, South Africa



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.

JEL Classification

E31, E39.

Full Text:

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