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Price And Wage Inflation

Author

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  • Alina Lucia Trifan

    (Academy of Economic Studies, Bucharest)

Abstract

This paper estimates equations for price and wage inflation based on a model of imperfect competition, using quarterly data for Romania for a 10 years sample from 1997:1 to 2007:1. From the estimation we can conclude: - the output gap has a low impact on inflation; - a growth in the labour productivity level reduces unit labour costs and inflation and increases real wages; - inflation imposes substantial costs on workers due to the negative relation between inflation and real wage; - the level of inflation depends positively on previous period exchange rate; - unemployment rate has a substantial impact on wages in Romania. This paper follows a different approach: instead of estimating a reduced-form relation between the change in inflation and the unemployment rate, I will estimate separate price and wage equations based on a model of imperfectly competitive firms.

Suggested Citation

  • Alina Lucia Trifan, 2008. "Price And Wage Inflation," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 11(11(528)(s), pages 261-267, November.
    • Handle: RePEc:agr:journl:v:11(528)(supplement):y:2008:i:11(528)(supplement):p:261-267
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