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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The South African Phillips curve: how applicable is the Gordon model?
Authors:Burger, P.ISNI
Marinkov, M.ISNI
Year:2006
Periodical:South African Journal of Economics
Volume:74
Issue:2
Pages:172-189
Language:English
Geographic term:South Africa
Subjects:inflation
economic models
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2006.00062.x/pdf
Abstract:Is there a Phillips curve relationship present in South Africa and if so, what form does it take? Traditionally the method to establish whether or not there is a relationship between the output gap and the change in inflation is merely to regress the latter on the former. This yields the augmented Phillips curve. However, R.J. Gordon (1990) has argued that this specification of the Phillips curve produces biased results. Instead, he puts forward and estimates successfully for several industrialized countries his so-called triangular model that tests for hysteresis and inertia in the behaviour of inflation, as well as the impact on inflation of changes in the output level. Using quarterly CPI (consumer price index) data for the period 1976-2002, this paper considers whether or not Gordon's triangle model is applicable to South Africa, i.e. are hysteresis and inertia present in South Africa? In addition, in an attempt to find a better estimation of the output gap, the paper also experiments with alternative ways to estimate the long-run output level, including the standard HP-filter (Hodrick-Prescott-filter), as well as a production function approach. App., bibliogr., notes, sum. [Journal abstract]
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