2026/07/30 by Guangling Liu, Christopher D. Solomon
paper · doi:10.1111/saje.70033
crossref issued 2026/07/30 · crossref published 2026/07/30 · crossref published-online 2026/07/30 · crossref created 2026/07/30 · crossref deposited 2026/07/30 · crossref indexed 2026/07/30 · crossref published-print 2026/12/01
ABSTRACT Conventional macroeconomics has viewed inflation as a monetary phenomenon through the quantity theory of money. Ever‐increasing sovereign debt globally has caused concern amongst economists. These concerns follow not from the ability of governments to repay their debt, but rather the impact of sizeable debt portfolios on price levels. The fiscal theory of the price level epitomises these concerns, contrasting the traditional view on inflation by arguing that it is a fiscal phenomenon caused by debt issuance without real backing. This study uses this fiscal inflation theory to analyse South Africa's inflation through a fiscal‐monetary VAR model, finding that South Africa's inflation dynamics are accurately described by both monetary and fiscal factors, but more so by the latter.