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Traded Goods, Competitiveness and Aggregate Fluctuations in the United Kingdom

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  • Alogoskoufis, George

Abstract

In this paper I investigate the relationships between wage adjustment, competitiveness, and aggregate fluctuations in the United Kingdom. This is done in the context of a model based on the distinction between internationally traded and nontraded goods, which is estimated and thoroughly tested. The traded goods sector is assumed to be a price-taker, and the focus is on the supply side. Competitiveness is defined as the relative price of traded to nontraded goods. The model can account quite well for fluctuations in UK competitiveness, output, wages and the terms of trade, and is used to examine the macroeconomic effects of a variety of disturbances. The results suggest that the UK economy is characterized by output flexibility and wage-price rigidity, a combination that produces patterns of macroeconomic adjustment which parallel the predictions of Keynesian demand-side models.

Suggested Citation

  • Alogoskoufis, George, 1988. "Traded Goods, Competitiveness and Aggregate Fluctuations in the United Kingdom," CEPR Discussion Papers 256, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:256
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    Cited by:

    1. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    2. Michael Arghyrou & Christopher Martin & Costas Milas, 2005. "Non-linear inflationary dynamics: evidence from the UK," Oxford Economic Papers, Oxford University Press, vol. 57(1), pages 51-69, January.
    3. Milas Costas & Legrenzi Gabriella, 2006. "Non-linear Real Exchange Rate Effects in the UK Labour Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(1), pages 1-34, March.
    4. Milas, C., 2003. "Non-linear multivariate adjustment of the UK real exchange rate," Working Papers 03/08, Department of Economics, City University London.
    5. Gottfries, Nils, 1999. "Markets Shares, Financial Constraints, and Pricing Behavior in the Export Market," Working Paper Series 1999:15, Uppsala University, Department of Economics.
    6. Milas, Costas, 1999. "Labor Market Decisions and Greek Manufacturing Competitiveness," Journal of Policy Modeling, Elsevier, vol. 21(4), pages 505-513, July.
    7. Christopher Martin & Michael Arghyrou & Costas Milas, 2004. "Nonlinear inflation dynamics: evidence from the UK," Money Macro and Finance (MMF) Research Group Conference 2003 59, Money Macro and Finance Research Group.

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