INFLATION-OUTPUT TRADE-OFF IN SOUTH AFRICA: IS THE PHILLIPS CURVE SYMMETRIC?

摘要

This study sets out to investigate whether the inflation-output trade-off in South Africa is symmetric or asymmetric; and if asymmetric, whether it is convex or concave. A New Keynesian dynamic stochastic general equilibrium model calibrated on South African data reveals that a negative demand shock reduces inflation and output while a positive demand shock of the same magnitude leads to a smaller increase in inflation and a larger increase in output, indicating that the inflation-output relationship in the country is concave asymmetric. These findings corroborate estimation results of the inflation-expectations augmented Phillips curve conducted using difference GMM on quarterly data.