AbstractThe study looks at the cyclical behavior of the markups and assesses its impact on inflation dynamics. The analysis finds that the aggregate level of the private sector''s markup is relatively high, thus pointing to the lack of strong competition in South Africa''s product markets. Additionally, the results suggest that the markups tend to move in a countercyclical manner, with a short-term positive impact on inflation. This implies that the countercyclical pattern of the markups is one factor among others that contribute to the relatively weak output gap-inflation co-movement. In the context of South Africa''s inflation targeting framework, the counter-cyclical markups may also generate an asymmetric response of monetary policy to the fluctuations in economic activity.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/204.
Date of creation: 01 Aug 2011
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This paper has been announced in the following NEP Reports:
- NEP-AFR-2011-09-22 (Africa)
- NEP-ALL-2011-09-22 (All new papers)
- NEP-HME-2011-09-22 (Heterodox Microeconomics)
- NEP-MAC-2011-09-22 (Macroeconomics)
- NEP-MON-2011-09-22 (Monetary Economics)
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