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Journal of Applied Economics Volume 27, 2024 - Issue 1
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Research Article

Inflation-income inequality nexus in South Africa: the role of inflationary environment

Eliphas NdouCollege of Economic and Management Sciences, Department of Economics, University of South Africa, Pretoria, South AfricaCorrespondence[email protected]
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Article: 2316968 | Received 24 Mar 2023, Accepted 05 Feb 2024, Published online: 28 Feb 2024

Figures & data

Figure 1. Components of income inequality in South Africa.

Source: Data sourced from Finn (Citation2015)
Figure 1. Components of income inequality in South Africa.

Figure 2. Presence of earners in the household in per cent by income decile.

Source: Adapted from Finn (Citation2015)
Figure 2. Presence of earners in the household in per cent by income decile.

Figure 3. coefficients of inflation persistence.

Source: Authors’ calculations
Figure 3. coefficients of inflation persistence.

Figure 4. The transmission of the positive inflation shocks to income inequality.

Source: Author`s drawing
Figure 4. The transmission of the positive inflation shocks to income inequality.

Figure 5. Inflation trajectories and periods when inflation was within the target band.

Source: South African Reserve Bank and authors’ calculations
Inflation targeting was adopted in February 2000
Figure 5. Inflation trajectories and periods when inflation was within the target band.

Figure 6. Income inequality and inflation dynamics.

Source: Authors’ calculations
Figure 6. Income inequality and inflation dynamics.

Table 1. Unit root tests.

Figure 7. Income inequality responses in baseline VAR model.

Source: Author’s calculations
The ordering of variables in ordering 1 is as follows: GDP growth, infl_dummy and Gini growth. The ordering of variables in ordering 2 is as follows Gini growth, infl_dummy and GDP growth. The infl_dummy refers to the dummies for inflation within 3 to 6 per cent and when above 6 per cent as defined in an earlier section.
Figure 7. Income inequality responses in baseline VAR model.

Figure 8. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock.

Source: Author’s calculations
Figure 8. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock.

Figure 9. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock.

Source: Author’s calculations
Figure 9. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock.

Figure 10. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock in 2000Q1 to 2016Q4.

Source: Author’s calculations
Figure 10. Comparisons of the responses of income inequality growth and employment growth to a positive inflation shock in 2000Q1 to 2016Q4.

Figure 11. Comparisons of the responses of income inequality growth and employment growth to positive inflation shock in 2000Q1 to 2016Q4.

Source: Author’s calculations
Figure 11. Comparisons of the responses of income inequality growth and employment growth to positive inflation shock in 2000Q1 to 2016Q4.

Table 2. Forecast error variance decompositions of income inequality growth.

Table 3. Forecast error variance decompositions of income inequality growth in per cent.

Figure 12. Responses of income inequality growth and GDP growth to positive inflation shock according to inflation bands.

Source: Author’s calculations
Figure 12. Responses of income inequality growth and GDP growth to positive inflation shock according to inflation bands.

Figure 13. Responses of income inequality growth and employment growth to positive inflation shock according to inflation thresholds.

Source: Authors’ calculations
Figure 13. Responses of income inequality growth and employment growth to positive inflation shock according to inflation thresholds.

Figure A1. Responses in the 2000Q1 to 2016Q4.

Source: Authors’ calculations
Ordering of the variables: GDP growth, employment growth, inflation and gini growth
Figure A1. Responses in the 2000Q1 to 2016Q4.

Figure A2. Responses in the 1993Q1 to 2016Q4.

Source: Authors’ calculations
Ordering of the variables: GDP growth, employment growth, inflation and Gini growth
Figure A2. Responses in the 1993Q1 to 2016Q4.

Figure A3. Responses in the 1993Q1 to 2016Q4.

Source: Authors’ calculations
Ordering of the variables: GDP growth, employment growth, inflation and Gini growth
Figure A3. Responses in the 1993Q1 to 2016Q4.

Figure A4. Responses in the 1993Q1 to 2016Q4.

Source: Authors’ calculations
Ordering of the variables: GDP growth, employment growth, inflation, and Gini coefficient growth.
Figure A4. Responses in the 1993Q1 to 2016Q4.

Data availability statement

The data that support the findings of this study are available from the author, upon reasonable request.

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