Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

This book focuses on income inequality, output-inflation trade-off and economic policy uncertainty in South Africa. Tight monetary and macroprudential policies raise income inequality. Income inequality transmits monetary policy and macroprudential policy shocks to real economic activity. Economic policy uncertainty influences the dynamics in the lending rate margins, inflation expectations, credit, pass-through of the repo rate to bank lending rates and companies’ cash holdings. The trade-off between output and inflation and output growth persistence vary with inflation regimes. Stimulatory demand policy shocks are less effective in high inflation regime. High income inequality raises consumption inequality, which raises demand for credit, but price stability matters in this link. Increased bank concentration raises income inequality, lowers economic growth and employment rate. Elevated economic policy uncertainty lowers output growth, lowers capital formation, reduces credit and raises companies’ cash holdings. Increased companies’ cash holdings reduce capital formation and impact the transmission of expansionary monetary policy shocks to real economic activity. This book shows there is an inflation level within the target band below it which lowers income inequality, while raising GDP growth and employment. Thus price stability, economic policy uncertainty and income inequality matter for the efficient transmission of policy shocks.

• Output-inflation trade off
• Companies` cash holding
• Inflation regimes
• Economic policy uncertainty
• Policy ineffectiveness
• Policy multipliers
• Counterfactual analysis
• New Keynesian economics
• Multiplier effects of expansionary monetary policy
• Output growth
• Income inequality
• GDP Growth
• Monetary policy shocks
• Financial globalisation
• Manufacturing employment shocks
• Credit Dynamics in South Africa
• Inequality in South Africa
• Bank concentration shocks impact
• Expansionary monetary policy

• Economic Research Department, South African Reserve Bank, Pretoria, South Africa

  Eliphas Ndou

• Department of Economic, Small Business Development, Tourism and Environmental Affairs, Free State Provincial Government, Bloemfontein, South Africa

  Thabo Mokoena

Dr Eliphas Ndou is an economist at the South African Reserve Bank, and lectures at the University of the Witwatersrand, Johannesburg, South Africa. He holds a PhD in Economics from this university. He has authored books focusing on international finance and macroeconomics, applied macroeconomics, monetary economics, economic growth, public economics, labour economics and banking regulation and macroprudential policy. 

Dr Thabo Mokoena has worked as a lead economist in the Economic Research and Statistics Department of the South African Reserve Bank. He currently works as Chief Director in the Department of Economics, Small Business Development, Tourism and Environmental Affairs. Dr Mokoena has an MA in Economics from State University of New York, USA and an MSc in Finance and Econometrics from the University of York, UK. In April 2008 he was awarded a PhD in Economics by the University of Pretoria, South Africa.

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