Money, Wages and Inflation in Middle-Income Developing Countries
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Summary:
This paper examines the short-run links between money growth, exchange rate depreciation, nominal wage growth, the output gap, and inflation in Chile, Korea, Mexico, and Turkey, using a generalized vector autoregression analysis. Nominal historical wage shocks are shown to have an important effect on movements in inflation only in Mexico. Generalized impulse response functions show that a positive historical shock to nominal wage growth generates a transitory but significant reduction in output. Inflation increases in all countries, particularly Mexico. A positive shock to nominal money growth raises real cash balances on impact and exerts an expansionary effect on output, despite an increase in real wages.
Series:
Working Paper No. 1997/174
Subject:
Exchange rates Foreign exchange Inflation Labor Prices Real wages Wage adjustments Wages
English
Publication Date:
December 1, 1997
ISBN/ISSN:
9781451976991/1018-5941
Stock No:
WPIEA1741997
Pages:
38
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