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KORNÉIA KRÁJNYAK JEROMIN ZETTELMEYER

We estimate equilibrium dollar wages for 15 transition economies of Central and Eastern Europe (CEE) and the former Soviet Union. Equilibrium dollar wages are Interpreted as full employment wages consistent with a country’s physical and human capital endowment, and estimated by regressing actual dollar wages on productivity and human capital proxies in a short (1990- 95) panel of 85 countries. The main results are: (1) equilibrium dollar wages have appreciated steadily in the Baltic countries and fast-reforming CEE transition economies, but have been fiat in most CIS countries: and (2) 1996 actual dollar wages remain below estimated equilibrium dollar wages for most but not ail transition countries covered.

Ms. Kornelia Krajnyak and Mr. Jeromin Zettelmeyer
This paper estimates equilibrium dollar wages for 15 transition economies. Equilibrium dollar wages are interpreted as full employment wages consistent with a country’s physical and human capital endowment, and estimated by regressing actual dollar wages on productivity and human capital proxies in a short (1990-95) panel of 85 countries. The main results are: (i) equilibrium dollar wages have appreciated steadily in the Baltic countries and fast-reforming Central and Eastern European (CEE) transition economies, but have been flat in most CIS countries; and (ii) 1996 actual dollar wages remain below estimated equilibrium dollar wages for most but not all transition countries covered.
International Monetary Fund. External Relations Dept.

European Community member states now face critical decisions on the design and implementation of monetary policy