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Modelling Wages and Prices in Australia

  • Gunnar Bårdsen

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Stan Hurn

    ()

    (School of Economics and Finance, Queensland University of Technology)

  • Zoë McHugh

    (Tactical Global Management Ltd, Brisbane)

Empirical models of Australian wages and prices are either single equation, equilibrium correction models or structural VAR models. Both theory and empirical evidence from other countries, however, suggests that wages and prices are jointly determined. Consequently, this paper estimates a simultaneous equation model of wages and prices for Australia, underpinned by a competing claims framework of imperfect competition. Two separate cointegrating relationships for wages and prices are identfied by imposing the economic hypotheses implied by the theory. The steady-state relationships for wages and prices are then embedded in a parsimonious, dynamic wage-price model.

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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 1202.

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Length: 40 pages
Date of creation: 22 Nov 2001
Date of revision: 30 Sep 2005
Handle: RePEc:nst:samfok:1202
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Web page: http://www.svt.ntnu.no/iso/WP/wp.htm
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  1. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  2. Gruen, David & Pagan, Adrian & Thompson, Christopher, 1999. "The Phillips curve in Australia," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 223-258, October.
  3. Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446, March.
  4. Franz, Wolfgang & Gordon, Robert J., 1993. "German and American wage and price dynamics : Differences and common themes," European Economic Review, Elsevier, vol. 37(4), pages 719-754, May.
  5. Olivier J. Blanchard, 1985. "The Wage Price Spiral," Working papers 400, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
  7. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Jacqueline Dwyer & Kenneth Leong, 2001. "Changes in the determinants of inflation in Australia," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 1-28 Bank for International Settlements.
  10. Franz, Wolfgang & Gordon, Robert J., 1993. "German and American wage and price dynamics: Differences and common themes," Discussion Papers 2, University of Konstanz, Center for International Labor Economics (CILE).
  11. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  12. Rodseth,A. & Nymoen,R., 1999. "Nordic wage formation and unemployment seven years later," Memorandum 10/1999, Oslo University, Department of Economics.
  13. Dag Kolsrud & Ragnar Nymoen, 1998. "Unemployment and the open economy wage-price spiral," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 450-467, October.
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