Abstract
D.Com. (Economics)
This study covers the possible causes of inflation in South
Africa. Inflation is usually defined as a period of sustained
increase in the general price level. The South African
inflation rate has accelerated from a moderate start in the
early 1960's, and has shown a persistent resistance to
regain former levels ever since. This resistance called for
an identification of the causes of inflation and for some
light to be shed on the inflation process experienced in
South Africa since 1965.
The aim of the investigation was, firstly, to estimate an
inflation function: and, secondly, to simulate the inflation
rate.
The study was carried out in two stages. In the first, a
survey was carried out of all the applicable inflation
theories. The conventional inflation theories, the quantity
monetary theory and the demand-pull and cost-push theories
were analysed. Consequently, the new inflation theories were
discussed. The discussion starts off with an analysis of
the Phillips curve, as interpreted by R. Lipsey, and the
differentiation by Friedman and Phelps between the short-run
and long-run Phillips curves, through to the criticism by
the School of Rational Expectation.