We investigate Granger causality between productivity growth and inflation in Korea using quarterly data for the period 1985Q1–2002Q4. Our results indicate unidirectional Granger causality from productivity growth to inflation. In light of such causality, we estimate the effect
of productivity and other variables on productivity. According to our regression results, a 1% increase in labour and Total Factor Productivity (TFP) reduces Consumer Price Index (CPI) inflation by 0.07–0.08% and 0.37–0.44%, respectively. Our results also suggest that the productivity-inflation
nexus became stronger in Korea since the Asian financial crisis, and that this was largely due to structural reform and technological progress.
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Document Type: Research Article
Department of International Trade,Honam University, Gwangju 506-714, Korea
Macroeconomic Studies Team,Bank of Korea, 3-110 Namdaemun-ro, Jung-guSeoul 100-794, Korea
Economics and Research Department,Asian Development Bank, 6 ADB AvenueMandaluyong City,Metro Manila, 1550 Philippines
Publication date: 2013-06-01
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