INFLATION IN SOUTH AFRICA 2000 - 2022: A NEW-KEYNESIAN APPROACH
INFLATION IN SOUTH AFRICA 2000 - 2022: A NEW-KEYNESIAN APPROACH

Summary/Abstract: Inflation is a daily monetary process that occurs over a period of time. Monetary policy is based on the Phillips Curve (PC) which is a tool used to describe inflation dynamics. The PC shows that inflation and unemployment have a negative relationship (Phillips, 1958). The study employed the Hybrid New Keynesian Phillips Curve (HNKPC) to investigate inflation dynamics in South Africa (SA). Additionally, the Autoregressive Distributed Lags (ARDL) model was used in the empirical analysis. The study aimed to find the hybrid curve in SA and to determine if monetary and fiscal variables affect inflation. Using quarterly data the study found the relationship between inflation and unemployment to be positive. As a result, no HNKPC existed in SA. In addition, fiscal and monetary variables influence inflation and therefore have a role to play in determining price levels in SA.

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