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On The Role Of Wages In The Ukrainian Transition Process : An Empirical Investigation

Author

Listed:
  • Gioacchino Fazio

    (Idefi)

  • Olivier Hueber

    (Idefi)

Abstract

There are two intriguing questions about the transition process undertaken by the Ukraine since its declaration of sovereignty in December 1991. (i) Why had one of the more prosperous republics of the former USSR in terms of economic development and population welfare been suffering of both a persistent and high inflation during the four first years of its young existence ? (ii) How - in the early months of 1996 - could the Ukrainian efficiently put an end to the skyrocketing of prices ? The aim of this paper is to understand how such an outstanding reversal of situation could occur. Firstly, in support of a cointegration test, we assert that between January 1992 and November 1995, the Ukraine was faced with a complex monetary regime in which wage was the economic variable through which most of the inflationary pressures passed, directly or indirectly. Secondly, we explain that since the beginning of 1996, the existent monetary regime has been replaced by a new one in which inflation is contained but wages and pensions arrears increase quickly. Such a situation is not sustainable in the short and we outline possible remedies.

Suggested Citation

  • Gioacchino Fazio & Olivier Hueber, 2004. "On The Role Of Wages In The Ukrainian Transition Process : An Empirical Investigation," Econometrics 0403009, EconWPA.
  • Handle: RePEc:wpa:wuwpem:0403009
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    References listed on IDEAS

    as
    1. Halushka, Andrij & Savluk, Sergei & Wörgötter, Andreas, 1994. "Ukrainian Hyperinflation: History, Analysis, Recommendations," East European Series 10, Institute for Advanced Studies.
    2. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
    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. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-555, June.
    5. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
    6. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-1056, September.
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    More about this item

    Keywords

    Cointegration; monetary regime; inflation; Ukraine; wages;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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