Does the Beveridge Curve Exist in the South African Case, and What Are the Implications for Monetary Policy?

Abstract

This chapter aims to determine how loose labour market reforms, positive labour productivity and company income tax shocks impact the Beveridge curve. Shifts in the Beveridge curve have implications for financial stability and the monetary policy stance. Evidence in this chapter supports the existence of the Beveridge curve in the South African data. The loosening of labour market reforms and positive labour productivity shocks lead to a movement along the Beveridge curve. The inward shift in the Beveridge curve is beneficial to price stability and the monetary policy stance via the decline in nominal wage, consumer price inflation and inflation expectations. Thus, labour market conditions and labour market reforms as supply-side policies are useful in impacting the relationship between unemployment and job adverts. At the same time, price stability benefits too.