IDEAS home Printed from https://ideas.repec.org/a/eis/articl/200gasteen.html
   My bibliography  Save this article

UK Monetary Policy, Earnings Growth and Labour Market Structure 1989-1998

Author

Listed:
  • A Gasteen
  • J Houston
  • D Asenova

Abstract

The Bank of England?s Monetary Policy Committee (MPC) sets UK interest rates to control inflation paying particular attention to earnings growth as measured by the Average Earnings Index (AEI). In October 1998, a revised AEI indicated that wage inflation had been overestimated bringing the conduct of monetary policy into question. This index was given credence by the popular belief that structural change in the labour market has reduced the earnings growth rate. However, a further revised AEI in March 1999 suggested wage inflation had been underestimated. This paper investigates why labour market changes have not suppressed earnings growth, assessing the influence of structural factors on the AEI. A new series of occupation-weighted, earnings indices from Labour Force and New Earnings Surveys? data is computed. The failure to adequately adjust for changes in UK labour market structure (in particular, increased service sector employment and greater female participation) is observed to have slightly underestimated earnings?growth.

Suggested Citation

  • A Gasteen & J Houston & D Asenova, 2000. "UK Monetary Policy, Earnings Growth and Labour Market Structure 1989-1998," Economic Issues Journal Articles, Economic Issues, vol. 5(2), pages 21-36, September.
  • Handle: RePEc:eis:articl:200gasteen
    as

    Download full text from publisher

    File URL: http://www.economicissues.org.uk/Files/2001/200cGasteen.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    2. B Bhaskara Rao & Rup Singh, 2005. "A Cointegration And Error Correction Approach To Demand For Money In Fiji: 1971-2002," Macroeconomics 0511012, EconWPA.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    4. Ananda Weliwita & E. M. Ekanayake, 1998. "Demand for money in Sri Lanka during the post-1977 period: a cointegration and error correction analysis," Applied Economics, Taylor & Francis Journals, vol. 30(9), pages 1219-1229.
    5. Bahmani-Oskooee Mohsen & Shin Sungwon, 2002. "Stability of the Demand for Money in Korea," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 85-95.
    6. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    7. Paresh Kumar Narayan & Russell Smyth, 2005. "Temporal causality and the dynamics of democracy, emigration and real income in Fiji," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(2), pages 245-261.
    8. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, pages 99-126.
    9. Sriram, Subramanian S., 2002. "Determinants and stability of demand for M2 in Malaysia," Journal of Asian Economics, Elsevier, vol. 13(3), pages 337-356.
    10. Pradhan, Basanta K. & Subramanian, A., 2003. "On the stability of demand for money in a developing economy: Some empirical issues," Journal of Development Economics, Elsevier, vol. 72(1), pages 335-351, October.
    11. Narayan, Paresh Kumar & Narayan, Seema, 2005. "Estimating income and price elasticities of imports for Fiji in a cointegration framework," Economic Modelling, Elsevier, vol. 22(3), pages 423-438, May.
    12. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    13. Ahmed Khalid, 1999. "Modelling money demand in open economies: the case of selected Asian countries," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1129-1135.
    14. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    15. Paresh Kumar Narayan & Biman Chand Prasad, 2007. "The long-run impact of coups on Fiji's economy: evidence from a computable general equilibrium model," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(2), pages 149-160.
    16. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    17. Paresh Kumar Narayan & Russell Smyth, 2006. "What Determines Migration Flows From Low-Income To High-Income Countries? An Empirical Investigation Of Fiji-U.S. Migration 1972-2001," Contemporary Economic Policy, Western Economic Association International, vol. 24(2), pages 332-342, April.
    18. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
    19. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    20. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    21. Santi Chaisrisawatsuk & Subhash Sharma & Abdur Chowdhury, 2004. "Money demand stability under currency substitution: some recent evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 14(1), pages 19-27.
    22. Elek, Andrew & Hill, Hal & Tabor, Steven R., 1993. "Liberalization and diversification in a small island economy: Fiji since the 1987 coups," World Development, Elsevier, vol. 21(5), pages 749-769, May.
    23. Jalal Siddiki, 2000. "Demand for money in Bangladesh: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1977-1984.
    24. Choi, Woon Gyu & Oh, Seonghwan, 2003. " A Money Demand Function with Output Uncertainty, Monetary Uncertainty, and Financial Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 685-709, October.
    25. Tuck Cheong Tang, 2002. "Demand for M3 and expenditure components in Malaysia: assessment from bounds testing approach," Applied Economics Letters, Taylor & Francis Journals, vol. 9(11), pages 721-725.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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:eis:articl:200gasteen. 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: (Dan Wheatley). General contact details of provider: http://edirc.repec.org/data/bsntuuk.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.