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Wage and price formation in a small open economy : evidence from Iceland

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dc.contributor.author Þórarinn Gunnar Pétursson 1966 is
dc.date.accessioned 2013-12-20T10:41:34Z
dc.date.available 2013-12-20T10:41:34Z
dc.date.issued 2002-03
dc.identifier.issn 1028-9445
dc.identifier.uri http://hdl.handle.net/10802/4752
dc.description Myndefni: línurit, töflur is
dc.description.abstract This paper uses an open economy version of a wage-price model with imperfect competition in goods and labour markets to analyse wage and price inflation in Iceland. The model identifies three main sources of wage and price inflation in Iceland: a conflicting claims channel, a real exchange rate channel, and an excess demand channel. The model explains a large proportion of wage and price inflation during the last three decades and is remarkably stable, considering the fundamental changes in the institutional setup in Iceland during this period. There is some evidence of an upward shift in the equilibrium mark-ups in the late 1980s. The results indicate that this was due to a substantial rise in the cost of capital that reflected the move towards market determined interest rates and a shift in policy priorities towards price stability, which cumulated in a path-breaking labour market agreement in early 1990. These changes led to a downward shift in steady state inflation and an upward shift in the natural rate of unemployment. en
dc.format.extent 27 s. is
dc.language.iso en
dc.publisher Central Bank of Iceland, Economics Department is
dc.relation.ispartofseries Central Bank of Iceland., Working papers ; 16
dc.relation.uri http://www.sedlabanki.is/uploads/files/wp-16.pdf
dc.subject Efnahagsmál is
dc.subject Líkön is
dc.subject Reiknilíkön is
dc.subject Verðmyndun is
dc.subject Kjaramál is
dc.subject Skýrslur is
dc.subject Ísland is
dc.title Wage and price formation in a small open economy : evidence from Iceland en
dc.type Skýrsla is
dc.identifier.gegnir 000430691


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