The Price-Wage Mechanism in Poland: An Endogenous Switching Model |
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| Authors: | Jacek Osiewalski Aleksander Welfe |
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| Institution: | 1. Department of Econometrics, Academy of Economics, ul. Rakowicka 27, 31-510, Kraków, Poland
2. Institute of Econometrics and Statistics, Department of Forecasts and Simulation Analyses, University of Lód?, ul. Rewolucji 1905 r. 41, 90-214, Lód?, Poland
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| Abstract: | This paper proposes a two-equation price-wage model that enables to test whether the inflationary pressure on wage rate is only present when the rate of inflation is greater than some threshold value. Since the likelihood function for this model is very nonstandard, we develop a small-sample Bayesian approach to estimate its parameters. Our empirical results for Poland, 1962–1993, give support to the hypothesis of the price- wage spiral with a positive threshold value of inflation. |
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