Research Paper No. 719

A Comment on "Wage Growth and the Inflation Process: A Multivariate Cointegration Analysis"

by

Olan T. Henry & Nilss Olekalns

NOVEMBER 1999

Department of Economics. University of Melbourne. Parkville Victoria 3052 Australia
 
 

ABSTRACT

Research by Ghali (1999) tested for the existence of causality between wages and prices in United States' aggregate data using a multivariate cointegration framework. We show that Ghali's model is misspecified and that the correct specification leads to a different interpretation of the long-run dynamic relation between wages and prices.
 
 

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