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The Wage-Price Spiral: Industrial Country Evidence and Implications
Author:
Ms. Magda E. Kandil
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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 164
Language:
English
Publication Date:
01 Aug 2003
DOI:
https://doi.org/10.5089/9781451858013.001
ISBN:
9781451858013
ISSN:
1018-5941
Pages:
36
Keywords:
WP; nominal wage; Wage-Price Spiral; Asymmetric Fluctuations; Output Effect; Standard of Living; contractionary demand shocks; real wage growth; price inflation; real wage adjustment; Real wages; Wage adjustments; Labor markets; Wages; Commodity markets
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using quarterly time-series data for a sample of twelve industrial countries, the paper investigates the dynamics of nominal wage and price adjustments in the face of aggregate demand shocks. The evidence illustrates patterns of the wage-price spiral and accompanying fluctuations. During economic expansions, the overlap of nominal adjustments in labor and product markets prolongs output expansion while maintaining or increasing the standard of living. In contrast, structural and institutional settings appear to have moderated the severity of the effects of contractionary demand shocks on real output growth and the standard of living in the variety of countries under investigation.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund