Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty by Eliphas Ndou & Thabo Mokoena

Author:Eliphas Ndou & Thabo Mokoena
Language: eng
Format: epub
ISBN: 9783030198039
Publisher: Springer International Publishing

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(14.7)

Figure 14.9 shows the role of inflation regimes. The income inequality growth is lower when inflation is below the 4.5% threshold than when this regime is shut off in the model. This suggests that a low inflation regime may help mitigate the adverse effects of the tightening in the NCA standards on income inequality growth.

Fig. 14.9Cumulative responses of the income inequality growth to the NCA shock and the role of inflation regimes

(Source Authors’ calculations)

In addition, Fig. 14.9e shows the extent to which the high inflation regime (that is, the inflation band above 6%) influences the transmission of the tightening in the NCA standards to income inequality growth. The income inequality growth is higher when inflation is within the 4.5–6% band and when inflation exceeds 6% than when this band is shut off in the model. This suggests that high inflation episodes amplify the increase in the income inequality growth following a tightening in the NCA.

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