## Denmark: Selected Issues

_IMF Staff Country Reports, June 26, 2023_

## Source details

**Canonical URL:** [Denmark: Selected Issues](https://www.imf.org/en/publications/cr/issues/2023/06/23/denmark-selected-issues-535194)

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- [Markdown version](/en/publications/cr/issues/2023/06/23/denmark-selected-issues-535194/index.md)
- [Structured JSON version](/en/publications/cr/issues/2023/06/23/denmark-selected-issues-535194/index.json)
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## Bibliographic details
- Published: June 26, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400246029.002

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### Summary of analysis
- The paper analyzes wage and inflation dynamics in Denmark.
- High profit margins contributed to growth in the gross domestic product deflator.
- Nominal wage growth in Denmark has so far been modest and outpaced by high inflation, putting real wage growth in negative territory.
- Wage formation in Denmark has historically been partly backward looking, and economic slack has played a role.
- Given realized high inflation and tightness in the labor market, wage pressures are expected to remain elevated in the near term.
- Some of these wage pressures are expected to be passed on to core inflation, sustaining high inflation.
- Conclusion: Determined policies to fight inflation are important.

### Key findings and projections
- High profit margins were a significant contributor to growth in the gross domestic product deflator.
- Historical evidence suggests that the contribution from wages to price deflators will likely pick up.
- Nominal wage growth has been modest relative to price increases, producing negative real wage growth to date.
- Tight labor markets increase the risk of elevated wage pressures in the near term.
- Elevated wage pressures are expected to feed into core inflation, sustaining high inflation.

### Labor market and wage dynamics
- Wage formation is characterized as partly backward looking.
- Economic slack has historically influenced wage outcomes.
- Current conditions: high inflation realized thus far + tight labor market => expectation of continued elevated wage pressures.

### Policy implications and recommendations
- Determined policies to fight inflation are emphasized as important to counter sustained inflationary pressures arising from wage and profit margin dynamics.
- Monitoring of wage formation mechanisms and labor market tightness is critical to anticipate pass-through to core inflation.

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## Content in this bundle

- **Denmark: Selected Issues; IMF Country Report No. 23/228; June 1, 2023**
  - [Denmark: Selected Issues; IMF Country Report No. 23/228; June 1, 2023 (Markdown version)](/-/media/files/publications/cr/2023/english/1dnkea2023002.pdf.md){rel="alternate" type="text/markdown"}
  - [Denmark: Selected Issues; IMF Country Report No. 23/228; June 1, 2023 (PDF)](/-/media/files/publications/cr/2023/english/1dnkea2023002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2023/06/23/denmark-selected-issues-535194_