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INFLATION AND ECONOMIC GROWTH IN SOUTH AFRICA: AN EMPIRICAL INVESTIGATION IN CRISIS MITIGATION

INFLATION AND ECONOMIC GROWTH IN SOUTH AFRICA: AN EMPIRICAL INVESTIGATION IN CRISIS MITIGATION This study examines the nexus between inflation dynamics and economic growth in South Africa. Specifically, the study aims to assess whether the inflation Granger-causes economic growth in South Africa. In order to address the problem of omitted variable bias associated with some previous studies, the study incorporates the employment as a third (intermittent) variable affecting both inflation and economic growth – thereby creating a trivariate causality model. Using the recently developed ARDL-bounds testing approach, the study finds that there is a bidirectional causal relationship between inflation and economic growth in South Africa. The results apply, irrespective of whether the causality model is estimated in the short run or in the long run. Other results show that there is a prima facie causal flow from economic growth to employment in South Africa. JEL Codes: E31, P24, D92, O41 Keywords: Africa, South Africa, inflation, economic growth, ARDL-bounds testing approach http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics, Management, and Financial Markets Addleton Academic Publishers

INFLATION AND ECONOMIC GROWTH IN SOUTH AFRICA: AN EMPIRICAL INVESTIGATION IN CRISIS MITIGATION

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Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
1842-3191
eISSN
1938-212X
Publisher site
See Article on Publisher Site

Abstract

This study examines the nexus between inflation dynamics and economic growth in South Africa. Specifically, the study aims to assess whether the inflation Granger-causes economic growth in South Africa. In order to address the problem of omitted variable bias associated with some previous studies, the study incorporates the employment as a third (intermittent) variable affecting both inflation and economic growth – thereby creating a trivariate causality model. Using the recently developed ARDL-bounds testing approach, the study finds that there is a bidirectional causal relationship between inflation and economic growth in South Africa. The results apply, irrespective of whether the causality model is estimated in the short run or in the long run. Other results show that there is a prima facie causal flow from economic growth to employment in South Africa. JEL Codes: E31, P24, D92, O41 Keywords: Africa, South Africa, inflation, economic growth, ARDL-bounds testing approach

Journal

Economics, Management, and Financial MarketsAddleton Academic Publishers

Published: Jan 1, 2013

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