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Output and Policy Ineffectiveness Proposition: A Perspective from Single Regression Equations

  • Eliphas Ndou
  • Thabo Mokoena
Chapter

Abstract

Evidence shows that the impact of a one percentage point increase in nominal GDP growth on real GDP growth is larger in the low inflation regime than in the high inflation regime. In addition, evidence from the logistic smooth transition autoregression model indicates that the optimal inflation threshold values are around 4.4–4.57 % and these values are within the current 3–6 % inflation band. This evidence suggests that price stability matters for the size of the impact of a positive nominal demand shock (such as expansionary monetary policy shocks) on real GDP growth based on the 6% inflation threshold. Therefore, there is a high likelihood that expansionary monetary policy shocks in the low inflation regime will raise real GDP growth more than in the high inflation regime.

References

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Eliphas Ndou
    • 1
    • 3
    • 4
  • Thabo Mokoena
    • 2
  1. 1.Economic Research DepartmentSouth African Reserve BankPretoriaSouth Africa
  2. 2.Department of Economic, Small Business Development, Tourism and Environmental AffairsFree State Provincial GovernmentBloemfonteinSouth Africa
  3. 3.School of Economic and Business SciencesUniversity of the WitwatersrandJohannesburgSouth Africa
  4. 4.Wits Plus, Centre for Part-Time StudiesUniversity of the WitwatersrandJohannesburgSouth Africa

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