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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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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. Julio A. Carrillo & Gert Peersman & Joris Wauters, 2013. "Endogenous Wage Indexation and Aggregate Shocks," Working Papers 2013-19, Banco de México.
  2. Seonghoon Cho & Koen Inghelbrecht & Geert Bekaert & Antonio Moreno & Lieven Baele, 2011. "Macroeconomic Regimes," 2011 Meeting Papers 817, Society for Economic Dynamics.
  3. Peter Tillmann & Maik H. Wolters, 2012. "The changing dynamics of US inflation persistence: a quantile regression approach," MAGKS Papers on Economics 201206, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Messina, Julian & Sanz-de-Galdeano, Anna, 2011. "Wage rigidity and disinflation in emerging countries," Policy Research Working Paper Series 5863, The World Bank.
  5. Berg, Tim Oliver, 2011. "Technology news and the U.S. economy: Time variation and structural changes," MPRA Paper 35361, University Library of Munich, Germany.
  6. Joris de Wind & Luca Gambetti, 2014. "Reduced-rank time-varying vector autoregressions," CPB Discussion Paper 270, CPB Netherlands Bureau for Economic Policy Analysis.
  7. 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.

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