IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/2008945.html
   My bibliography  Save this paper

Wage and price dynamics in Portugal

Author

Listed:
  • Robalo Marques, Carlos

Abstract

This paper investigates the persistence of aggregate wages and prices in Portugal assuming a model of a unionised economy with imperfect competition. An impulse response analysis is conducted where the structural shocks are identified by taking into account the long-run properties of the model, as well as the co-integrating and weak-exogeneity properties of the system. Real wages and wage inflation emerge as especially persistent following an import price shock, while price inflation is more persistent following an unemployment shock. At the business cycle horizon variation in the forecast errors of wages is attributable mainly to unemployment shocks (about 80 percent), whereas variation in the forecast errors of prices is attributable mainly to import price shocks (about 60 percent) and to unemployment shocks (around 20 percent). Productivity shocks explain somewhat less than 10 percent of the variation in forecast errors of wages and prices. JEL Classification: C32, C51, E31, J30

Suggested Citation

  • Robalo Marques, Carlos, 2008. "Wage and price dynamics in Portugal," Working Paper Series 945, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2008945
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp945.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, February.
    2. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
    3. Andersen, Torben M., 1994. "Price Rigidity: Causes and Macroeconomic Implications," OUP Catalogue, Oxford University Press, number 9780198287605.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
    2. Dias, Daniel A. & Marques, Carlos Robalo & Martins, Fernando, 2013. "Wage rigidity and employment adjustment at the firm level: Evidence from survey data," Labour Economics, Elsevier, vol. 23(C), pages 40-49.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nicola Acocella & Laura Bisio & Giovanni Di Bartolomeo & Alessandra Pelloni, "undated". "Labor market imperfections, real wage rigidities and financial shocks," Working Papers 80/11, Sapienza University of Rome, Metodi e Modelli per l'Economia, il Territorio e la Finanza MEMOTEF.
    2. Mattesini, Fabrizio & Rossi, Lorenza, 2009. "Optimal monetary policy in economies with dual labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 33(7), pages 1469-1489, July.
    3. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    4. Latsos Sophia, 2018. "Real Wage Effects of Japan’s Monetary Policy," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 69(1), pages 177-215, July.
    5. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
    6. Jordi Galí, 2011. "The Return Of The Wage Phillips Curve," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 436-461, June.
    7. Hervé Le Bihan & Jérémi Montornès & Thomas Heckel, 2012. "Sticky Wages: Evidence from Quarterly Microeconomic Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 1-32, July.
    8. repec:onb:oenbwp:y::i:161:b:1 is not listed on IDEAS
    9. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2003. "Econometric inflation targeting," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 430-461, December.
    10. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
    11. Proaño, Christian R., 2012. "Gradual wage-price adjustments, labor market frictions and monetary policy rules," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 220-235.
    12. Girardi, Riccardo & Paruolo, Paolo, 2013. "Wages and prices in Europe before and after the onset of the Monetary Union," Economic Modelling, Elsevier, vol. 35(C), pages 643-653.
    13. Jose Ignacio García Pérez & Victoria Osuna, 2011. "The effects of introducing a single open-ended contract in the Spanish labour market," Working Papers 11.07, Universidad Pablo de Olavide, Department of Economics.
    14. Gunnar Bårdsen & Stan Hurn & Zoë Mchugh, 2007. "Modelling Wages and Prices in Australia," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 143-158, June.
    15. Knell, Markus, 2013. "Nominal and real wage rigidities. In theory and in Europe," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 89-105.
    16. Fabrice Orlandi & Werner Roeger & Anna Thum-Thysen, 2018. "The Return of the European Wage Phillips Curve," European Economy - Discussion Papers 085, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    17. Lucian Croitoru, 2016. "Are We Systematically Wrong when Estimating Potential Output and the Natural Rate of Interest?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 128-151, June.
    18. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    19. Nina Vishnevskaya, 2019. "State Labour Market Policy: Reforming Institutions in OECD Countries," Public administration issues, Higher School of Economics, issue 1, pages 35-60.
    20. Isabel Cairó & Shigeru Fujita & Camilo Morales-Jimenez, 2020. "The Cyclicality of Labor Force Participation Flows: The Role of Labor Supply Elasticities and Wage Rigidity," Working Papers 20-23, Federal Reserve Bank of Philadelphia.
    21. Sushant Acharya & Edouard Challe & Keshav Dogra, 2023. "Optimal Monetary Policy According to HANK," American Economic Review, American Economic Association, vol. 113(7), pages 1741-1782, July.

    More about this item

    Keywords

    impulse response function; persistence; prices; structural error-correction model; wages;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:2008945. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.