Modelling Wages and Prices in Australia

41 Pages Posted: 2 Nov 2005

See all articles by Gunnar Bardsen

Gunnar Bardsen

Norwegian University of Science and Technology (NTNU) - Department of Economics

Stan Hurn

Queensland University of Technology - School of Economics and Finance

Zoë McHugh

Tactical Global Management (TGM)

Date Written: September 2005

Abstract

Empirical models of Australian wages and prices are either single equation, equilibrium correction models or structural VAR models. Both theory and empirical evidence from other countries, however, suggests that wages and prices are jointly determined. Consequently, 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.

Keywords: wage and price, cointegration, dynamic modelling, partial systems, structural breaks

JEL Classification: E52, C53

Suggested Citation

Bardsen, Gunnar and Hurn, Stan and McHugh, Zoë, Modelling Wages and Prices in Australia (September 2005). Available at SSRN: https://ssrn.com/abstract=830564 or http://dx.doi.org/10.2139/ssrn.830564

Gunnar Bardsen (Contact Author)

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

NTNU Dragvoll
N-7491 Trondheim
Norway

HOME PAGE: http://www.svt.ntnu.no/iso/gunnar.bardsen

Stan Hurn

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
+61 7 3864 5066 (Phone)
+61 7 3864 1500 (Fax)

Zoë McHugh

Tactical Global Management (TGM) ( email )

London WC2H 9AU
United Kingdom