Modeling Initiation in South Africa: A Multivariate Cointegration Analysis

27 September 2001
Publication Type: Working Paper

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 co-integration techniques, we find robust evidence for 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 mark-up of about 30 percent; three times a high as the 10 percent mark-up found for the U.S.

Series title: Working Paper (Interest) 17
1 July 2001
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