Inflation Targeting and Economic Growth in South Africa – An Econometric Analysis

Authors

Keywords:

consumer price index; monetary; interest rate; inflation targeting; fiscal policy

Abstract

The article aims to analyse the influence of inflation on economic growth in South Africa using quarterly data spanning from 2000-2018. The study is focusing on a quantitative research, exploratory research design and a positivism research philosophy with the variables of consumer price index, inflation, gross domestic product, interest rate and unemployment. The data set comprised of quarterly data from 2000 to 2018, extracted from the Statistics South Africa (Stats SA) website and also from the South African Reserve Bank (SARB). The Augmented Dickey-Fuller Furthermore, Phillips-Perron (PP) test and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) results showed stationarity results at first difference. The serial correlation, diagnostic tests, normality test and heteroscedasticity passed expectations of the assumptions. The optimal lag selection was carried out by means of the Akaike Information Criterion (AIC) and the optimal lag length of two was selected. The existence of long-run equilibrium amongst the variables was tested using the Johansen co-integrated test. The Johansen co-integrated test indicated three co-integration equations, whereby the variables were found to be co-integrated at first difference. The VECM results showed that GDP is explained by lagged values of GDP, inflation and the consumer price index control variable in the short run. The relationship between economic growth and inflation targeting was found to exist. Moreover, the analyses reflected that there is a long-run relationship between inflation targeting and economic growth in South Africa. Additionally, monetary policy should be formulated with measures which are innovative and new to stabilise the exchange rate at a level that can be sustained. Furthermore, the government of South Africa is encouraged to continually align their economic policies and establish tight control on fiscal policy.

Author Biographies

Ravinder Rena, NWU Business School, North-West University

Professor, Dr Ravinder Rena is a profound academician and distinguished scholar in economics, writer, editor, adviser and public intellectual with over 28 years of teaching and research experience in Asia-Pacific, Africa and European continents. He has been an independent consultant and training expert. Prof Rena is currently working as Professor of Economics and Internationalization Project Leader at the NWU Business School, North-West University, South Africa. He also serves as an Adjunct Professor of Economics for Master’s and Doctorate Programmes at Monarch Business School, Monarch University, Hagendorn, Zug, Switzerland. Previously, he worked as a Professor of Economics at the Department of Economics, University of the Western Cape, Cape Town, South Africa. He also served as Professor and the Coordinator, Joint African Master's Programme (JAMP), Harold Pupkewitz Graduate School of Business at the Namibia University of Science and Technology (NUST). He also worked as the Head of Economics, Department of Business Studies, the Papua New Guinea University of Technology, Papua New Guinea. Prof. Rena earned his Ph.D. from the Department of Economics, Osmania University, Hyderabad, India, with an achievement of University Gold Medal (for the Best Ph.D. candidates/ thesis in the field of Economics/ Commerce/ Business Management). He obtained his M.A., B.Ed., M.Phil., Ph.D from Osmania University and B.A., and LL.B., from Kakatiya University, Warangal, India.

He got the prestigious Award of the Best Researcher 2011 from Namibia University of Science and Technology and also the recipient of the esteemed Award -Man of the Year 2012 which was bestowed upon him by the American Biographic Institute (ABI), USA. Based on his extraordinary research contributions, American Historical Society, USA has been enlisted his profile in the World Who is Who International. He serves as the Chairman of the Panel of Judges for Economics of the Global UnderGraduate (UA) Award based in Dublin, Ireland, United Kingdom. He wrote 10 books and published more than 120 articles in reputed National and International peer-reviewed Journals. Besides, he has published more than 150 articles in Newspapers and Magazines and Websites and presented over 40 papers in the national and international conferences and seminars. He is the founding Editor-In-Chief of an International Journal of Education Economics and Development (IJEED) and Associate Editor of African Journal of Science, Technology, Innovation and Development (AJSTID) which are IBSS and Scopus indexed Journals published by Inderscience, UK and Taylor and Francis UK respectively. He serves as an Editorial Board Member for many reputed Journals.  He has been a Keynote Speaker for various national and international conferences in Europe, America, Africa and Asian continents. As of August 2020, his author Rank is 5,493 out of 512,413 of Social Science Research Network (SSRN),USA in which he is among the top 1.07% researchers in the world. His Google scholar citations: 925; h-index: 17; ih-index-33.

He has widely written in the areas of Economics of Education, Development Economics and Inclusive growth, Globalization and Higher Education, Microfinance, Rural Entrepreneurship, WTO, Sustainable development, FDIs, development aid in Africa. He supervised Ph.Ds, M.Phils and Masters’ theses and dissertations across the globe. He served many academic and professional committees as a Chairman and as a Panel Member. He is also been an external examiner/moderator for Masters and Ph.D of different Universities of Africa, Europe, Asia, America and Australia. He travelled to over 40 countries in the world.

Kelebogile Kotsokoane, North-West University

MBA Student, NWU Business School

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How to Cite

Rena, R., & Kotsokoane, K. (2021). Inflation Targeting and Economic Growth in South Africa – An Econometric Analysis: Array. Acta Universitatis Danubius. Œconomica, 17(3). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/1158

Issue

Vol. 17 No. 3 (2021)

Section

Business Administration and Business Economics

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The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.