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Abstract

In this paper the issue of causality between wages and prices in UK has been tested. OLS relationship between prices and wages is positive; productivity is not significant in determination of prices or wages too. These variables from these statistics we can see that are stationary at 1 lag, i.e. they are I1 variables, except for CPI variables which is I2 variable. From the VECM model, If the log wages increases by 1%, it is expected that the log of prices would increase by 5.24 percent. In other words, a 1 percent increase in the wages would induce a 5.24 percent increase in the prices.About the short run parameters, the estimators of parameters associated with lagged differences of variables may be interpreted in the usual way.Productivity was exogenous repressor and it is deleted since it has coefficient no different than zero. The relation causation between these two variables is from CPI log→ real wage log .Granger causality test showed that only real wages influence CPI or consumer price index that proxies prices, this is one way relationship, price do not influence wages in our model.



Item Type: MPRA Paper -

Original Title: Causal relationship between wages and prices in UK: VECM analysis and Granger causality testing-

Language: English-

Keywords: VECM, Granger causality, real wages, prices, cointegration , OLS-

Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor ProductivityJ - Labor and Demographic Economics > J0 - General > J01 - Labor Economics: GeneralC - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes-





Autor: Josheski, Dushko

Fuente: https://mpra.ub.uni-muenchen.de/34095/







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