Trade unions’ inflation expectations and the second-round effect in South Africa
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...
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| Format: | Article |
| Language: | English |
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Associazione Economia civile
2018-03-01
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| Series: | PSL Quarterly Review |
| Subjects: | |
| Online Access: | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/13968/pdf_77 |
| _version_ | 1828202452203077632 |
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| author | Temitope Lydia Leshoro |
| author_facet | Temitope Lydia Leshoro |
| author_sort | Temitope Lydia Leshoro |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-04-12T11:48:39Z |
| format | Article |
| id | doaj.art-b9a91a6a9a334f5e83bf58b3d7780bfc |
| institution | Directory Open Access Journal |
| issn | 2037-3635 2037-3643 |
| language | English |
| last_indexed | 2024-04-12T11:48:39Z |
| publishDate | 2018-03-01 |
| publisher | Associazione Economia civile |
| record_format | Article |
| series | PSL Quarterly Review |
| spelling | doaj.art-b9a91a6a9a334f5e83bf58b3d7780bfc2022-12-22T03:34:15ZengAssociazione Economia civilePSL Quarterly Review2037-36352037-36432018-03-0171284859410.13133/2037-3643_71.284_5Trade unions’ inflation expectations and the second-round effect in South AfricaTemitope Lydia Leshoro0 University of South AfricaInflation 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.http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/13968/pdf_77Exchange rateInflation expectationsTrade unions |
| spellingShingle | Temitope Lydia Leshoro Trade unions’ inflation expectations and the second-round effect in South Africa PSL Quarterly Review Exchange rate Inflation expectations Trade unions |
| title | Trade unions’ inflation expectations and the second-round effect in South Africa |
| title_full | Trade unions’ inflation expectations and the second-round effect in South Africa |
| title_fullStr | Trade unions’ inflation expectations and the second-round effect in South Africa |
| title_full_unstemmed | Trade unions’ inflation expectations and the second-round effect in South Africa |
| title_short | Trade unions’ inflation expectations and the second-round effect in South Africa |
| title_sort | trade unions inflation expectations and the second round effect in south africa |
| topic | Exchange rate Inflation expectations Trade unions |
| url | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/13968/pdf_77 |
| work_keys_str_mv | AT temitopelydialeshoro tradeunionsinflationexpectationsandthesecondroundeffectinsouthafrica |