Modelling Wages and Prices in Australia

Authors: BÅRDSEN, GUNNAR¹; HURN, STAN²; MCHUGH, ZOË³

Source: The Economic Record, Volume 83, Number 261, June 2007 , pp. 143-158(16)

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Abstract:

This paper estimates a simultaneous-equation model of wages and prices for Australia, underpinned by a competing claims framework of imperfect competition. Two separate co-integrating relationships for wages and prices are identified by imposing the economic hypotheses implied by the theory. The steady-state relationships for wages and prices are then embedded in a parsimonious, dynamic wage-price model. The final model is both simple and parsimonious and able to describe the process of wage and price inflation in Australia.

Keywords: E52; C53

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1475-4932.2007.00390.x

Affiliations: 1: Department of Economics, Norwegian University of Science and Technology, Trondheim, Norway 2: School of Economics and Finance, Queensland University of Technology, Brisbane, Queensland, Australia 3: Tactical Global Management (UK) LTD, London, UK

Publication date: 2007-06-01