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

Author

Listed:
  • 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.

Suggested Citation

  • Kolsrud, Dag & Nymoen, Ragnar, 2010. "Macroeconomic Stability or Cycles? The Role of the Wage-price Spiral," Memorandum 06/2010, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2010_006
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Ragnar Nymoen, 2017. "Between Institutions and Global Forces: Norwegian Wage Formation Since Industrialisation," Econometrics, MDPI, Open Access Journal, vol. 5(1), pages 1-54, January.
    2. 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.

    More about this item

    Keywords

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

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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