Wage and price formation in a small open economy: Evidence from
This paper uses an open economy version of a wage-price model with imperfect competition in goods and labour markets to analyse wage and price inflation in Iceland. The model identifies three main sources of wage and price inflation in Iceland: a conflicting claims channel, a real exchange rate chan...
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ftciteseerx:oai:CiteSeerX.psu:10.1.1.500.818 2023-05-15T16:46:32+02:00 Wage and price formation in a small open economy: Evidence from Thórarinn G. Pétursson The Pennsylvania State University CiteSeerX Archives 2002 application/pdf http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.500.818 http://english.sedlabanki.is/uploads/files/wp-16.pdf en eng http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.500.818 http://english.sedlabanki.is/uploads/files/wp-16.pdf Metadata may be used without restrictions as long as the oai identifier remains attached to it. http://english.sedlabanki.is/uploads/files/wp-16.pdf Wage and price formation mark-up pricing wage bargaining dynamic modelling text 2002 ftciteseerx 2016-01-08T09:07:36Z This paper uses an open economy version of a wage-price model with imperfect competition in goods and labour markets to analyse wage and price inflation in Iceland. The model identifies three main sources of wage and price inflation in Iceland: a conflicting claims channel, a real exchange rate channel, and an excess demand channel. The model explains a large proportion of wage and price inflation during the last three decades and is remarkably stable, considering the fundamental changes in the institu-tional setup in Iceland during this period. There is some evidence of an upward shift in the equilibrium mark-ups in the late 1980s. The results indicate that this was due to a substantial rise in the cost of capital that reflected the move towards market determined interest rates and a shift in policy priorities towards price stability, which cumulated in a path-breaking labour market agreement in early 1990. These changes led to a downward shift in steady state inflation and an upward shift in the natural rate of unemployment. Text Iceland Unknown |
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English |
topic |
Wage and price formation mark-up pricing wage bargaining dynamic modelling |
spellingShingle |
Wage and price formation mark-up pricing wage bargaining dynamic modelling Thórarinn G. Pétursson Wage and price formation in a small open economy: Evidence from |
topic_facet |
Wage and price formation mark-up pricing wage bargaining dynamic modelling |
description |
This paper uses an open economy version of a wage-price model with imperfect competition in goods and labour markets to analyse wage and price inflation in Iceland. The model identifies three main sources of wage and price inflation in Iceland: a conflicting claims channel, a real exchange rate channel, and an excess demand channel. The model explains a large proportion of wage and price inflation during the last three decades and is remarkably stable, considering the fundamental changes in the institu-tional setup in Iceland during this period. There is some evidence of an upward shift in the equilibrium mark-ups in the late 1980s. The results indicate that this was due to a substantial rise in the cost of capital that reflected the move towards market determined interest rates and a shift in policy priorities towards price stability, which cumulated in a path-breaking labour market agreement in early 1990. These changes led to a downward shift in steady state inflation and an upward shift in the natural rate of unemployment. |
author2 |
The Pennsylvania State University CiteSeerX Archives |
format |
Text |
author |
Thórarinn G. Pétursson |
author_facet |
Thórarinn G. Pétursson |
author_sort |
Thórarinn G. Pétursson |
title |
Wage and price formation in a small open economy: Evidence from |
title_short |
Wage and price formation in a small open economy: Evidence from |
title_full |
Wage and price formation in a small open economy: Evidence from |
title_fullStr |
Wage and price formation in a small open economy: Evidence from |
title_full_unstemmed |
Wage and price formation in a small open economy: Evidence from |
title_sort |
wage and price formation in a small open economy: evidence from |
publishDate |
2002 |
url |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.500.818 http://english.sedlabanki.is/uploads/files/wp-16.pdf |
genre |
Iceland |
genre_facet |
Iceland |
op_source |
http://english.sedlabanki.is/uploads/files/wp-16.pdf |
op_relation |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.500.818 http://english.sedlabanki.is/uploads/files/wp-16.pdf |
op_rights |
Metadata may be used without restrictions as long as the oai identifier remains attached to it. |
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1766036635185577984 |