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Europe > Norway

You are looking at 1 - 2 of 2 items for :

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Cover IMF Working Papers
Wage Growth and Inflation in Europe: A Puzzle?
Vizhdan Boranova
,
Raju Huidrom
,
Sylwia Nowak
,
Petia Topalova
,
Mr. Volodymyr Tulin
, and
Mr. Richard Varghese
Wages have been rising faster than productivity in many European countries for the past few years, yet signs of underlying consumer price pressures remain limited. To shed light on this puzzle, this paper examines the historical link between wage growth and inflation in Europe and factors that influence the strength of the passthrough from labor costs to prices. Historically, wage growth has led to higher inflation, but the impact has weakened since 2009. Empirical analysis suggests that the passthrough from wage growth to inflation is significantly lower in periods of subdued inflation and inflation expectations, greater competitive pressures, and robust corporate profitability. Thus the recent pickup in wage growth is likely to have a more muted impact on inflation than in the past.
Keywords:
WP; wage growth; inflation expectation; Wages; inflation; passthrough; Europe; Passthrough ratio; wage-inflation passthrough; firms' profitability; Labor costs; Producer prices; Wage adjustments; Global
Cover IMF Working Papers
Estimation of the Near Unit Root Model of Real Exchange Rates
Mr. C. John McDermott
The time-series properties of real exchange rates, on a number of definitions, for 22 industrial countries during 1979-95 were used to re-examine whether PPP holds. It is shown that if real exchange rates reverted to a constant mean slowly, say by five percent a month, then at standard levels of significance we should expect 11 of the 22 series examined to yield evidence of mean reversion and to reject that hypothesis of a unit root. Using models that imply a constant unconditional mean or trend-stationary productivity changes, we find that only one of the 22 real exchange rates shows evidence against unit roots. This low rate of rejection of unit roots in real exchange rates can be construed as evidence against PPP.
Keywords:
WP; confidence interval; unit root model; unbiased estimator; estimator density; interval estimator; Phillips-perron estimator; Real exchange rates; Real effective exchange rates; Exchange rates; Purchasing power parity; Labor costs