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Macroeconomic Stability or Cycles? The Role of the Wage-price Spiral

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Author Info

  • Kolsrud, Dag

    (Statistics Norway)

  • Nymoen, Ragnar

    ()
    (Dept. of Economics, University of Oslo)

Abstract

We derive aggregate supply (AS) relationships for an intermediate-run macro model. The wage-price spiral provides the conceptual framework for a synthesis of different contesting theoretical and empirical perspectives on the AS curve: the Phillips curve model (PCM) and the wage-price equilibrium correction model (WPECM). The generalized AS curve is grafted into a small macro model. We analyze stability conditions, steady states, and dynamic solutions, using a combination of algebra and simulations. The specification of the AS curve, as a PCM or a WPECM, is shown to be important for all aspects of the model’s solution, but within each model also the detailed parameterization is of qualitative importance. For example, endogenous cyclical fluctuations are typical for both nominal and real variables, e.g. inflation and unemployment.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2010/Memo-06-2010.pdf
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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 06/2010.

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Length: 44 pages
Date of creation: 01 May 2010
Date of revision:
Handle: RePEc:hhs:osloec:2010_006

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Related research

Keywords: AS-AD; cycles; dynamics; equilibrium correction; macroeconomics; nominal rigidity; Phillips curve; unemployment; wage-price spiral;

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References

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  1. Víctor M. Montuenga-Gómez & José M. Ramos-Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
  2. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2004. "Econometric Evaluation of the New Keynesian Phillips Curve," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 671-686, 09.
  3. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199246502, October.
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Cited by:
  1. KARGI, Bilal, 2013. "Ücret Yapışkanlığı Hipotezi'nin Test Edilmesi: Türkiye'de Asgari Ücret ve Büyüme Üzerine Zaman Serileri Analizi (2005-2012)
    [Testing Wage Rigidity Stickiness Hypothesis: Time Series Analysis on the
    ," MPRA Paper 55695, University Library of Munich, Germany.

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