![]() We find the slack measure that performs best is one that includes labour market indicators and indicated in 2019Q3 that capacity pressure was low. ![]() We show that a Phillips curve relationship continues to exist in South Africa. To advance this discussion, we consider an augmented Phillips curve specification that accounts for various drivers of inflation and test different measures of economic slack in forecasting inflation and GDP outcomes. Explanations for an observed weakening between measures of slack and inflation have included: mis‐measurement of economic slack, the influence of other factors (such as the exchange rate, foreign inflation or wages) or whether some components of the inflation basket are more sensitive to the business cycle than other. But there is an ongoing debate about the usefulness of the Phillips curve to explain inflation. ![]() a larger output gap) should be associated with decelerating inflation. The Phillips curve is a commonly used benchmark for modelling inflation, based on the intuition that greater economic slack (i.e.
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