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Time variation in U.S. wage dynamics

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  • Hofmann, Boris
  • Peersman, Gert
  • Straub, Roland

Abstract

Supply and demand shocks had much stronger long-run effects on nominal wages and prices during the “Great Inflation”. For supply shocks, there is even a sign switch in the nominal wage response. Before and after the “Great Inflation”, nominal wages moved in the same direction as real wages and in the opposite direction of the price level, whereas nominal wages and prices moved in the same direction at longer horizons after the shock in the 1970s. Estimation of a DSGE model shows that these results reflect changes in the degree of wage indexation over time, which was considerably higher during the “Great Inflation”.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 8 ()
Pages: 769-783

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Handle: RePEc:eee:moneco:v:59:y:2012:i:8:p:769-783

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Messina, Julian & Sanz-de-Galdeano, Anna, 2011. "Wage rigidity and disinflation in emerging countries," Policy Research Working Paper Series 5863, The World Bank.
  2. Lieven Baele & Geert Bekaert & Seonghoon Cho & Koen Inghelbrecht & Antonio Moreno, 2011. "Macroeconomic Regimes," NBER Working Papers 17090, National Bureau of Economic Research, Inc.
  3. Tillmann, Peter & Wolters, Maik H., 2014. "The changing dynamics of US inflation persistence: A quantile regression approach," Economics Working Papers 2014-09, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Berg, Tim Oliver, 2011. "Technology news and the U.S. economy: Time variation and structural changes," MPRA Paper 35361, University Library of Munich, Germany.
  5. Champagne, Julien & Kurmann, André, 2013. "The great increase in relative wage volatility in the United States," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 166-183.
  6. Joris de Wind & Luca Gambetti, 2014. "Reduced-rank time-varying vector autoregressions," CPB Discussion Paper 270, CPB Netherlands Bureau for Economic Policy Analysis.

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