Inflation and the role of wages in South Africa: A co-integration analysis

An explanation of inflation that focuses on the costs of production, wages (or unit labour costs) plays a central role. In South Africa, the recent change to an inflation-targeting monetary policy framework and the relative strong role of trade unions has increased the need to understand and quantify the interaction between inflation and wages. The purpose of the working paper is to investigate this relationship empirically, on both the aggregate and sectoral levels, using multivariate co-integration techniques.