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Are Wages Forward Looking?

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  • Moghadam, Reza
  • Wren-Lewis, Simon

Abstract

This paper presents a study of U.K. earnings over the period 1967-87 aimed at establishing whether wagesetters anticipate future movements in prices. Two models are proposed: the first where agents form rational predictions about future price movements and the second where they use simple rules-of-thumb based on past price movements. These two dynamic models, based on the same long-run equation, are compared, drawing on the methods of D. F. Hendry. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Moghadam, Reza & Wren-Lewis, Simon, 1994. "Are Wages Forward Looking?," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 403-424, July.
  • Handle: RePEc:oup:oxecpp:v:46:y:1994:i:3:p:403-24
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    Cited by:

    1. Ragnar Nymoen & Gunnar Bardsen & Eilev S. Jansen, 2004. "The empirical relevance of the New Keynesian Phillips curve," Econometric Society 2004 North American Winter Meetings 328, Econometric Society.
    2. Bårdsen, Gunnar & Jansen, Eilev S. & Nymoen, Ragnar, 2003. "Testing the New Keynesian Phillips curve," Memorandum 18/2002, Oslo University, Department of Economics.
    3. Harald Uhlig & Martin Lettau, 1999. "Rules of Thumb versus Dynamic Programming," American Economic Review, American Economic Association, vol. 89(1), pages 148-174, March.
    4. Darby, Julia & Ireland, Jonathan & Leith, Campbell & Wren-Lewis, Simon, 1998. "COMPACT: a rational expectations, intertemporal model of the United Kingdom economy," Economic Modelling, Elsevier, vol. 16(1), pages 1-52, January.
    5. Gunnar Bardsen & Eilev Jansen & Ragnar Nymoen, 2002. "Model Specification and Inflation Forecast Uncertainty," Annals of Economics and Statistics, GENES, issue 67-68, pages 495-517.
    6. Kees Folmer, 2009. "Why do macro wage elasticities diverge?," CPB Memorandum 224, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Kees Folmer, 2009. "Why do macro wage elasticities diverge? A meta analysis," CPB Discussion Paper 122, CPB Netherlands Bureau for Economic Policy Analysis.

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