Advanced Search
MyIDEAS: Login

Causal relationship between wages and prices in UK: VECM analysis and Granger causality testing

Contents:

Author Info

  • Josheski, Dushko
  • Lazarov, Darko
  • Fotov, Risto
  • Koteski, Cane

Abstract

In this paper the issue of causality between wages and prices in UK has been tested. OLS relationship between prices and wages is positive; productivity is not significant in determination of prices or wages too. These variables from these statistics we can see that are stationary at 1 lag, i.e. they are I(1) variables, except for CPI variables which is I(2) variable. From the VECM model, If the log wages increases by 1%, it is expected that the log of prices would increase by 5.24 percent. In other words, a 1 percent increase in the wages would induce a 5.24 percent increase in the prices.About the short run parameters, the estimators of parameters associated with lagged differences of variables may be interpreted in the usual way.Productivity was exogenous repressor and it is deleted since it has coefficient no different than zero. The relation (causation) between these two variables is from CPI_log→ real_wage_log .Granger causality test showed that only real wages influence CPI or consumer price index that proxies prices, this is one way relationship, price do not influence wages in our model.

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://mpra.ub.uni-muenchen.de/34095/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34095.

as in new window
Length:
Date of creation: 13 Oct 2011
Date of revision:
Handle: RePEc:pra:mprapa:34095

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: VECM; Granger causality; real wages; prices; cointegration ; OLS;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Saten Kumar & Don J. Webber & Geoff Perry, 2009. "Real wages, inflation and labour productivity in Australia," Working Papers 0921, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  2. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  3. Erica L. Groshen & Mark E. Schweitzer, 1996. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Staff Reports 9, Federal Reserve Bank of New York.
  4. Jack Strauss & Mark E. Wohar, 2004. "The Linkage between Prices, Wages, and Labor Productivity: A Panel Study of Manufacturing Industries," Southern Economic Journal, Southern Economic Association, vol. 70(4), pages 920-941, April.
  5. Peter Flaschel & Göran Kauermann & Willi Semmler, 2007. "Testing Wage And Price Phillips Curves For The United States," Metroeconomica, Wiley Blackwell, vol. 58(4), pages 550-581, November.
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:pra:mprapa:34095. 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: (Ekkehart Schlicht).

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.