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Australian Wage and Price Inflation: 1971-1994

Author

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  • Lynne Cockerell

    (Reserve Bank of Australia)

  • Bill Russell

    (Reserve Bank of Australia)

Abstract

This paper estimates an imperfect competition model of price and wage adjustment for Australia. The results suggest the Australian economy can be characterised as one where firms are trying to achieve their desired long-run income share while workers are primarily concerned with maintaining their real wage. The estimation of the price-wage model is complicated by two problems; namely the substantial and persistent changes in income shares and the changing means in the inflation series over the sample. The first problem was overcome by extending the estimation period to include the wage shocks in the early 1970s which allows the income shares to be characterised as stationary. The second problem was addressed by imposing a restriction to the wage equation. This allowed a range of possible steady state inflation rates in the model over the estimated sample.

Suggested Citation

  • Lynne Cockerell & Bill Russell, 1995. "Australian Wage and Price Inflation: 1971-1994," RBA Research Discussion Papers rdp9509, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9509
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    File URL: https://www.rba.gov.au/publications/rdp/1995/pdf/rdp9509.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mallick, Debdulal, 2019. "Policy regimes and the shape of the Phillips curve in Australia," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1077-1094.
    2. Mallick, Debdulal, 2014. "A Spectral Representation of the Phillips Curve in Australia," MPRA Paper 59794, University Library of Munich, Germany.
    3. Nicolas Canry & Julien Fouquau & Sébastien Lechevalier, 2010. "Price Dynamics In Japan (1981-2001): A Structural Analysis Of Mechanisms In The Goods And Labor Markets," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(3/4), pages 357-374.
    4. Guy Debelle & James Vickery, 1998. "Is the Phillips Curve A Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 384-398, December.
    5. Gordon de Brouwer & James O'Regan, 1997. "Evaluating Simple Monetary-policy Rules for Australia," RBA Annual Conference Volume (Discontinued), in: Philip Lowe (ed.),Monetary Policy and Inflation Targeting, Reserve Bank of Australia.
    6. Banerjee, Anindya & Russell, Bill, 2005. "Inflation and measures of the markup," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 289-306, June.
    7. Joseph Atta-Mensah & Sawuya Nakijoba, 2019. "Estimating the Potential Output and Output Gap of Ghana," Applied Economics and Finance, Redfame publishing, vol. 6(3), pages 58-70, May.
    8. Bill Russell, 2006. "Non-Stationary Inflation and the Markup: an Overview of the Research and some Implications for Policy," Dundee Discussion Papers in Economics 191, Economic Studies, University of Dundee.
    9. Bill Russell, 2002. "The Long Run Relationships among Price Variability, Inflation and the Markup," Dundee Discussion Papers in Economics 127, Economic Studies, University of Dundee.
    10. Ivan D. Trofimov, 2019. "Stability of Labour Shares: Evidence from OECD Economies," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(1), pages 57-89.
    11. Liew, Freddy, 2012. "Forecasting inflation in Asian economies," MPRA Paper 36781, University Library of Munich, Germany.
    12. Gordon de Brouwer, 1998. "Estimating Output Gaps," RBA Research Discussion Papers rdp9809, Reserve Bank of Australia.
    13. Anindya Banerjee & Bill Russell, 2000. "The Relationship between the Markup and Inflation in the G7 Economies and Australia," Dundee Discussion Papers in Economics 119, Economic Studies, University of Dundee.

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