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Title: |
The Wage Growth and Inflation Nexus in a
Dynamic Multivariate Context: New Evidence from Greece |
| Author: |
Hondroyiannis,
George |
| Author
Affiliation: |
Bank of Greece
and Harokopio U |
| Source: |
International Economic Journal, Spring 2003, v. 17, no. 1, pp. 121-138 |
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Publication Date: |
Spring 2003 |
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Abstract: |
Different
macroeconomic schools of thought have provided different explanations
for the relationship between the price level and wage level. This paper
investigates the linkages between price level and wage level employing
quarterly data in Greece over the period 1980-98. To account for
influences on the bivariate relationship of monetary and exchange rate
policies, money supply and exchange rate were added to the model. In the
empirical analysis the Johansen maximum likelihood technique is applied
to search for a long-run relationship among the macroeconomic variables.
The application of vector error-correction models is used to investigate
the response of inflation and wage inflation to monetary and exchange
rate policies aiming at testing the sources of price-wage variations.
The estimation results employing the vector error-correction models
indicate that a unidirectional causality exists from wages to price
level. In addition, the results indicate that inflation in the long run
is determined by changes in money supply and exchange rate. The results
imply that since wages have an impact on price level, wage inflation can
be used as monetary policy information variable. |
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