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Modelling Inflation In South Africa: A Multivariate Cointegration Analysis

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  • J.W. FEDDERKE
  • E. SCHALING

Abstract

We employ an expectations augmented Phillips curve framework to investigate the link between inflation, unit labour costs, the output gap, the real exchange rate and inflation expectations. Using multivariate cointegration techniques, we find evidence consistent with mark-up behaviour of output prices over unit labour costs. Most importantly, we find that the mark-up in the South African economy is much higher than in the U.S. For South Africa we find a markup of about 30 per cent: three times as high as the 10 per cent markup found for the U.S. Copyright 2005 Economic Society of South Africa.

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Bibliographic Info

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 73 (2005)
Issue (Month): 1 (03)
Pages: 79-92

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Handle: RePEc:bla:sajeco:v:73:y:2005:i:1:p:79-92

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Cited by:
  1. Janine Aron & John Muellbauer, 2008. "Multi-sector inflation forecasting - quarterly models for South Africa," Economics Series Working Papers WPS/2008-27, University of Oxford, Department of Economics.
  2. Monique Reid & Gideon du Rand, 2013. "A sticky information Phillips curve for South Africa," Working Papers 22/2013, Stellenbosch University, Department of Economics.
  3. Janine Aron & John Muellbauer & Coen Pretorius, 2004. "A Framework for Forecasting the Components of the Consumer Price," Development and Comp Systems 0409054, EconWPA.
  4. Johannes W. Fedderke & Andrew J Hill, 2006. "Industry Structure and Labour Market Flexibility in the South African Manufacturing Sector: A Time Series and Panel Data Approach," Working Papers 43, Economic Research Southern Africa.
  5. Ben Smit & Stan du Plessis, 2001. "Inflation and the role of wages in South Africa: A co-integration analysis," Working Papers 01053, University of Cape Town, Development Policy Research Unit.
  6. Janine Aron, 2009. "Some Issues in Modeling and Forecasting Inflation in South Africa," Economics Series Working Papers CSAE WPS/2009-01, University of Oxford, Department of Economics.
  7. Stan du Plessis & Ben Smit & Federico Sturzenegger, 2008. "Identifying Aggregate Supply and Demand Shocks in South Africa †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(5), pages 765-793, November.
  8. Janine Aron & John Muellbauer & Coen Pretorius, 2004. "A Framework for Forecasting the Components of the Consumer Price Index: application to South Africa," Economics Series Working Papers WPS/2004-07, University of Oxford, Department of Economics.
  9. Lawrence Edwards & Robert Z. Lawrence, 2006. "South African Trade Policy Matters: Trade Performance and Trade Policy," NBER Working Papers 12760, National Bureau of Economic Research, Inc.

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