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Trade unions' inflation expectations and the second-round effect in South Africa

Author

Listed:
  • Temitope Lydia Leshoro

    (University of South Africa)

Abstract

Inflation expectations play a critical role in the formation of prices and wages. Hence, the South African Reserve Bank (SARB) reacts to inflation’s direct effects by tightening the monetary policy in order to avoid any second-round effects. The study we conducted attempts to investigate whether the inflation rate are led by inflation expectations or vice versa. We analyse quarterly data using the Toda-Yamamoto causality technique and three different measures of inflation expectations of the trade union representatives. We also investigate the role of the exchange rate in leading or lagging the inflation rate. Overall, the results obtained demonstrate that the inflation and the exchange rates have bidirectional causality, while unidirectional causality exists from the inflation rate to inflation expectations. We therefore conclude that a second-round effect of inflation cannot be induced by changes in the inflation expectations of the trade unions, and provide some policy recommendations.

Suggested Citation

  • Temitope Lydia Leshoro, 2018. "Trade unions' inflation expectations and the second-round effect in South Africa," PSL Quarterly Review, Economia civile, vol. 71(284), pages 85-94.
    • Handle: RePEc:psl:pslqrr:2018:15
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    Citations

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    Cited by:

    1. Andrew Phiri & Lutho Mbekeni, 2021. "Fisher’s hypothesis, survey-based expectations and asymmetric adjustments: Empirical evidence from South Africa," International Economics and Economic Policy, Springer, vol. 18(4), pages 825-846, October.
    2. Ehouma Jacques Allou & Bosede Ngozi Adeleye & Jianhua Cheng & Rehman Abdul, 2020. "Is there a nexus between China outward foreign direct investment and welfare in Côte dʼIvoire? Empirical evidence from the Toda–Yamamoto procedure," African Development Review, African Development Bank, vol. 32(3), pages 499-510, September.
    3. Hacievliyagil Nuri & Eksi Ibrahim Halil, 2019. "A Micro Based Study on Bank Credit and Economic Growth: Manufacturing Sub-Sectors Analysis," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 72-91, June.

    More about this item

    Keywords

    Exchange rate; Inflation expectations; Trade unions;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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