No. 12/2002
MODELLING WAGES AND PRICES IN AUSTRALIA
Gunnar Bårdsen
Stan Hurn
Zoë McHugh
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 cointegrating 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.
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