For the case of Italy, some recent empirical studies points to either increased strategic complementarity in price setting, due in turn to higher sensitivity of demand elasticity to prices (Riggi and Santoro, 2015) or to the weakening of workers’ bargaining power (Lombardi, Riggi and Viviano, 2021) as key factors behind the flattening of the Phillips curve.
The role of the financial channel Financial markets are another channel through which global conditions affect South Africa. Global growth, inflation and the pace of policy normalisation in advanced economies affect investor risk appetite, cross-border capital flows and, hence, the availability and cost of external funding.