IMF Working Papers

Inflation, Money Demand, and Purchasing Power Parity in South Africa

By Gunnar Jonsson

September 1, 1999

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Gunnar Jonsson. Inflation, Money Demand, and Purchasing Power Parity in South Africa, (USA: International Monetary Fund, 1999) accessed November 12, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This empirical study for South Africa indicates that there exists a stable money demand type of relationship among domestic prices, broad money, real income, and interest rates, as well as a long-run relationship among domestic prices, foreign prices, and the nominal exchange rate. In the short run, shocks to the nominal exchange rate affect domestic prices but have virtually no impact on real output, while shocks to broad money have a temporary impact on real output before becoming inflationary. Both types of shocks seem to trigger a monetary policy response, since the short-term interest rate adjusts quickly.

Subject: Demand for money, Exchange rates, Foreign exchange, Monetary base, Money, Nominal effective exchange rate, Purchasing power parity

Keywords: Africa, Cointegration, Demand for money, Domestic price, Error-correction term, Exchange rates, Inflation, Inflation adjustment, Inflation development, Inflation differential, Inflation equation, Inflation expectation, Inflation forecasting perspective, Integrating vector, Monetary base, Money demand, Nominal effective exchange rate, Nominal exchange rate, Nominal exchange rate movement, Price level, Purchasing power parity, Term structure, WP

Publication Details

  • Pages:

    28

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1999/122

  • Stock No:

    WPIEA1221999

  • ISBN:

    9781451854473

  • ISSN:

    1018-5941