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Cyclicality of real wages in the USA and Germany: New insights from wavelet analysis

  • Marczak, Martyna
  • Gómez, Víctor

This article provides new insights into the cyclical behavior of consumer and producer real wages in the USA and Germany. We apply two methods for the estimation of the cyclical components from the data: the approach based on the structural time series models and the ARIMA-model-based approach combined with the canonical decomposition and a band-pass filter. We examine the extracted cycles drawing on two wavelet concepts: wavelet coherence and wavelet phase angle. In contrast to the analysis in the time or frequency domains, wavelet analysis allows for the identification of possible changes in cyclical patterns over time. From the findings of our study, we can infer that the USA and Germany differ with respect to the lead-lag relationship of real wages and the business cycle. In the USA, both real wages are leading the business cycle in the entire time interval. The German consumer real wage is, on the other hand, lagging the business cycle. For the German producer real wage, the lead-lag pattern changes over time. We also find that real wages in the USA as well in Germany are procyclical or acyclical until 1980 and countercyclical thereafter.

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Paper provided by University of Hohenheim, Center for Research on Innovation and Services (FZID) in its series FZID Discussion Papers with number 50-2012.

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Date of creation: 2012
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Handle: RePEc:zbw:fziddp:502012
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  1. Marczak, Martyna & Beissinger, Thomas, 2010. "Real Wages and the Business Cycle in Germany," IZA Discussion Papers 5199, Institute for the Study of Labor (IZA).
  2. Brandolini, Andrea, 1995. " In Search of a Stylised Fact: Do Real Wages Exhibit a Consistent Pattern of Cyclical Variability?," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 103-63, June.
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  8. Anger, Silke, 2007. "The cyclicality of effective wages within employer-employee matches: evidence from German panel data," Working Paper Series 0783, European Central Bank.
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  11. P J Pérez, 2001. "Cyclical Properties in the Main Western Economies," Centre for Growth and Business Cycle Research Discussion Paper Series 33, Economics, The Univeristy of Manchester.
  12. Philipp Berens, . "CircStat: A MATLAB Toolbox for Circular Statistics," Journal of Statistical Software, American Statistical Association, vol. 31(i10).
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