A Small Linear Model of Wage- and Price-Inflation in the Norwegian Economy
AbstractThis paper presents a model of inflation in a small open economy which features both wage-wage linkages and wage-price spiral. Hence the authors have a simultaneous structure which contains the conventional Scandinavian model of inflation as a special case. Full system estimation results are reported. Great emphasis is placed on data coherency and on parameter stability. One interesting finding is that both wage growth and the wage level in the exposed (E)-sector are strongly influenced by the outside wage. This contradicts the predictions of the Scandinavian model, which defines the wage-leading role of the E-sector by the absence of outside wage effects in E-sector wage formation. Another result is that the speed of adjustment to exogenous shocks is greater for prices than for wages. This finding may be important in explaining real wage flexibility, which is often seen as the hallmark of low unemployment economies such as the Norwegian. Copyright 1991 by John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 6 (1991)
Issue (Month): 3 (July-Sept.)
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Web page: http://www.interscience.wiley.com/jpages/0883-7252/
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- Kåre Johansen & Ørjan Mydland & Bjarne Strøm, 2006.
"Politics in Wage setting: Does government colour matter?,"
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- Bårdsen, Gunnar & Nymoen, Ragnar, 2006. "U.S. natural rate dynamics reconsidered," Memorandum 13/2006, Oslo University, Department of Economics.
- Shigeyuki Hamori & Takeshi Hoshikawa & Junya Masuda & Kunihiro Hanabusa, 2009. "Price and Wage Setting in Japan: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 29(1), pages 38-50.
- de la Croix, David, 1994. " Wage Interdependence through Decentralized Bargaining," Journal of Economic Surveys, Wiley Blackwell, vol. 8(4), pages 371-403, December.
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