Money, Wages and Inflation in Middle-Income Developing Countries
IMF Working Papers, December 1, 1997
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- Money, Wages and Inflation in Middle-Income Developing Countries
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Bibliographic details
- Authors: Pierre-Richard Agénor, Willy A Hoffmaister
- Published: December 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451976991.001
Research question and methodology
- Examines short-run links between money growth, exchange rate depreciation, nominal wage growth, the output gap, and inflation.
- Countries analyzed: Chile, Korea, Mexico, and Turkey.
- Empirical approach: generalized vector autoregression analysis (generalized VAR analysis).
Key findings
- Nominal historical wage shocks have an important effect on movements in inflation only in Mexico.
- Generalized impulse response functions show:
- 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.
- Exerts an expansionary effect on output, despite an increase in real wages.
Subject areas and keywords
- Subject: Exchange rates, Foreign exchange, Inflation, Labor, Prices, Real wages, Wage adjustments, Wages
- Keywords: and generalized VAR analysis, consumer price inflation, Determinants of inflation, Exchange rates, Inflation, inflation shock, nominal wage, nominal wage growth, output gap, Real wages, VAR analysis, VAR innovation, VAR model, Wage adjustments, Wages, WP
Content in this bundle
- Money, Wages and Inflation in Middle-Income Developing Countries - WP/97/174