Impact of Producer Prices on Manufacturing Productivity in the Era of Pre- and During-Inflation Targeting in South Africa

The study examined the effectiveness of inflation-targeting monetary policy in preserving steady productivity growth and stable inflation rates. It compared the pre- and during-inflation targeting periods from 1990Q1 to 1999Q4 and 2000Q1 to 2022Q1, using a Bayesian vector autoregressive with the Min...

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Bibliographic Details
Published inAfrican journal of business and economic research Vol. 19; no. 2; pp. 273 - 298
Main Authors Thelile Nene, Shelter, Talent Zungu, Lindokuhle
Format Journal Article
LanguageEnglish
Published Sabinet Online 30.06.2024
Subjects
Central banks
Economic growth
Ghana
Industrial productivity
Inflation (Finance)
Minnesota
Monetary policy
Prices and rates
South Africa
Sub-Saharan Africa
South Africa
Ghana
Minnesota
Sub-Saharan Africa
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Summary:The study examined the effectiveness of inflation-targeting monetary policy in preserving steady productivity growth and stable inflation rates. It compared the pre- and during-inflation targeting periods from 1990Q1 to 1999Q4 and 2000Q1 to 2022Q1, using a Bayesian vector autoregressive with the Minnesota prior model. The results showed that producer price shocks have a significant positive impact on manufacturing output before inflation targeting, but after the implementation of IT policy, these shocks have a negative impact on manufacturing output, with only a slight improvement in the long run. The study suggested that South African policymakers should be vigilant and evaluate the country's economic state before adopting measures that could negatively affect other economic growth indicators. Central banks should implement contractionary monetary policies in a strategic and situational manner, while governments should increase their expenditure on infrastructure and technological advancements. A targeted economic policy promoting innovation, research, and skill-building can foster manufacturing growth.
ISSN:1750-4554
1750-4562
DOI:10.31920/1750-4562/2024/v19n2a12