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Structural Change And Nonlinearities In A Phillips Curve Model For South Africa

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  • KEVIN S. NELL

Abstract

The main objective of this article is to reexamine the role of the Phillips curve for monetary policy analysis in South Africa by augmenting the model for major structural changes in the balance‐of‐payments and labor market. The main findings show that a linear Phillips curve with an output gap in levels accurately describes South Africa's nontrended inflation experience during 1971(Q1)–1984(Q4), whereas a piecewise concave curve with an output gap in growth rates correctly predicts the decelerating inflation pattern during 1986(Q1)–2001(Q2). The concave curve after 1985 imparts a deflationary bias that requires expansionary demand‐side policies to stabilise the inflation rate. An important corollary is that expansionary demand‐side policies can raise the average growth rate of the output gap over time without sacrificing stabilization objectives. (JEL C22, E3, E52)

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  • Kevin S. Nell, 2006. "Structural Change And Nonlinearities In A Phillips Curve Model For South Africa," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 600-617, October.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:4:p:600-617
    DOI: 10.1093/cep/byl004
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    Cited by:

    1. Tafadzwa Ruzive & Thando Mkhombo & Simbarashe Mhaka & Nomahlubi Mavikela & Andrew Phiri, 2019. "Electricity Intensity and Unemployment in South Africa: A Quantile Regression Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 31-40.
    2. Dladla, Pholile & Malikane, Christopher, 2022. "Inflation dynamics in an emerging market: The case of South Africa," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 262-271.
    3. Lumengo Bonga-Bonga & Beatrice Desiree Simo-Kengne, 2018. "Inflation and Output Growth Dynamics in South Africa: Evidence from the Markov Switching Vector Autoregressive Model," Journal of African Business, Taylor & Francis Journals, vol. 19(1), pages 143-154, January.
    4. Andrew Phiri, 2022. "Pursuing the Phillips Curve in an African Monarchy: A Swazi Case Study," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 16(4), December.
    5. Harold Ngalawa & Coretha Komba, 2020. "Inflation, Output and Monetary Policy in South Africa," Working Papers 398, African Economic Research Consortium, Research Department.
    6. Phiri, Andrew, 2018. "Pursuing the Phillips curve in an African monarchy: The Swazi case," MPRA Paper 89199, University Library of Munich, Germany.
    7. Phiri, Andrew, 2015. "Examining asymmetric effects in the South African Philips curve: Evidence from logistic smooth transition regression (LSTR) models," MPRA Paper 64487, University Library of Munich, Germany.
    8. Andrew Phiri, 2018. "Pursuing the Philips curve in an African monarchy: A Swazi case study," Working Papers 1832, Department of Economics, Nelson Mandela University.

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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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