Advanced Search
MyIDEAS: Login

The relative adjustment of wages and prices: direct tests within a multiple-equation system

Contents:

Author Info

  • Martin Schmidt

Abstract

In order to assess the relative rigidity of the aggregate price level and the nominal wage rate most researchers have focused on the implied behaviour of the real wage rate in response to a purely demand disturbance. The present work examines the explicit behaviour of the two variables and is therefore able to analyse the variables' short-run responses within the context of their defined long-run behaviour. While the paper reports evidence of long-run stability in the real wage rate, additional evidence is presented which supports both sticky-price and sticky-wage models. The determining factor is the choice of lag.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684032000056779
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 8 ()
Pages: 985-997

as in new window
Handle: RePEc:taf:applec:v:35:y:2003:i:8:p:985-997

Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20

Order Information:
Web: http://www.tandfonline.com/pricing/journal/RAEC20

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pesaran, M.H. & Shin, Y., 1993. "Cointegration and Speed of Convergence to Equilibrium," Cambridge Working Papers in Economics 9311, Faculty of Economics, University of Cambridge.
  2. McCallum, Bennett T, 1986. "On "Real' and "Sticky-Price' Theories of the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 397-414, November.
  3. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
  4. Geary, Patrick T & Kennan, John, 1982. "The Employment-Real Wage Relationship: An International Study," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 854-71, August.
  5. Cochrane, John H. & Sbordone, Argia M., 1988. "Multivariate estimates of the permanent components of GNP and stock prices," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 255-296.
  6. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  7. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December.
  8. Edward N. Gamber & Frederick L. Joutz, 1997. "Real Wages over the Business Cycle," Eastern Economic Journal, Eastern Economic Association, vol. 23(3), pages 277-291, Summer.
  9. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
  10. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
  11. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
  12. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  13. Craig S. Hakkio & Mark Rush, 1987. "Market efficiency and cointegration," Research Working Paper 87-05, Federal Reserve Bank of Kansas City.
  14. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
  15. Neftci, Salih N, 1978. "A Time-Series Analysis of the Real Wages-Employment Relationship," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 281-91, April.
  16. Mocan, H Naci & Topyan, Kudret, 1993. "Real Wages over the Business Cycle: Evidence from a Structural Time Series Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(4), pages 363-89, November.
  17. Cutler, Harvey & Davies, Stephen & Rhodd, Janice & Schwarm, Walter, 1997. "The Demand for M1 in a Large Macroeconomic System: Evidence from Cointegration Analysis," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 53-78, January.
  18. Harvey, A. C. & Stock, James H., 1988. "Continuous time autoregressive models with common stochastic trends," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 365-384.
  19. Lee, Kevin C. & Pesaran, M. Hashem, 1993. "Persistence profiles and business cycle fluctuations in a disaggregated model of U.K. output growth," Ricerche Economiche, Elsevier, vol. 47(3), pages 293-322, September.
  20. Martin B. Schmidt, 2000. "The Dynamic Behavior of Wages and Prices: Cointegration Tests within a Large Macroeconomic System," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 123-138, July.
  21. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
  22. Sumner, Scott & Silver, Stephen, 1989. "Real Wages, Employment, and the Phillips Curve," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 706-20, June.
  23. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  24. Hendry, David F, 1986. "Econometric Modelling with Cointegrated Variables: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 201-12, August.
  25. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  26. repec:nbr:nberre:0126 is not listed on IDEAS
  27. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  28. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  29. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
  30. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March.
  31. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  32. Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-66, December.
  33. Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 241-65, February.
  34. Gordon, Robert J, 1988. "The Role of Wages in the Inflation Process," American Economic Review, American Economic Association, vol. 78(2), pages 276-83, May.
  35. Mehra, Yash P, 1991. "Wage Growth and the Inflation Process: An Empirical Note," American Economic Review, American Economic Association, vol. 81(4), pages 931-37, September.
  36. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  37. Spencer, David E, 1998. "The Relative Stickiness of Wages and Prices," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 120-37, January.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:35:y:2003:i:8:p:985-997. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.