The Wage-Price Spiral: Industrial Country Evidence and Implications

Author/Editor:

Magda E. Kandil

Publication Date:

August 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2003/164

Subject:

Commodity markets Financial markets Labor Labor markets Real wages Wage adjustments Wages

English

Publication Date:

August 1, 2003

ISBN/ISSN:

9781451858013/1018-5941

Stock No:

WPIEA1642003

Pages:

36

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