Monetary policy and wage inequality in South Africa

Type Journal Article - Emerging Markets Review
Title Monetary policy and wage inequality in South Africa
Publication (Day/Month/Year) 2022
Page numbers 100911
The distributive consequences of monetary policy have been researched only recently and almost entirely in advanced economies. This paper sheds light on the effect of conventional monetary policy shocks on the wage distribution in South Africa, where inequality – mostly driven by the segmented labour market – remains a large issue. Impulse response functions estimated from local projections show that the wage distribution significantly worsens in response to monetary shocks. Wages in the top half of the distribution, that benefit from unanticipated expansions, are less responsive to surprise contractions, remaining protected by skill-biased technology and strong labour unions.

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