Cyclicality of real wages in the USA and Germany: New insights from wavelet analysis

Abstract

This article provides new insights into the cyclical behavior of consumer and producer real wages in the USA and Germany. We apply two methods for the estimation of the cyclical components from the data: the approach based on the structural time series models and the ARIMA-model-based approach combined with the canonical decomposition and a band-pass filter. We examine the extracted cycles drawing on two wavelet concepts: wavelet coherence and wavelet phase angle. In contrast to the analysis in the time or frequency domains, wavelet analysis allows for the identification of possible changes in cyclical patterns over time.

Wagner’s law versus displacement effect

“…Regarding the mother wavelet for continuous wavelet transform, we follow previous studies in the literature such as Aguiar-Conraria et al (2012), Rua (2012), Aguiar-Conraria and Soares (2014), Marczak and Gómez (2015), and many others, and assume the Morlet wavelet for ω 0 > 5 such that…”

Automatic stabilizers in the Japanese tax system

“…Our econometric method resorts to a wavelet analysis, which is an increasingly popular tool in recent empirical analysis in the field of economics and finance (Aguiar-Conraria, Martins, & Soares, 2012;Aguiar-Conraria & Soares, 2014;Caraiani, 2012;Gallegati & Semmler, 2014;Marczak & Gó mez, 2015;Rua, 2012Rua, , 2013. In line with these authors, our analysis is based on the complex wavelet transform.…”

“…Conraria & Soares, 2014;Marczak & Gó mez, 2015;Rua, 2012Rua, , 2013, we assume the Morlet wavelet of the form:…”

Generator Coherency Using the Wavelet Phase Difference Approach

“…For this central frequency of the wavelet function, the Fourier frequency period is almost equal to the scale . Also, Morlet wavelet is non-orthogonal and complex [30], [31].…”