Price-wage dynamics in a transition economy: The case of Poland

Abstract

Abstract. In this paper we analyse the wage-price relationship of an economy in transition characterized by important structural changes. It is known (see Perron, 1989) that structural breaks in stationary time series can induce apparent unit roots. The stationadty analysis of the series employed in the present model is conducted jointly with the assumption that the breakpoint location is unknown. We follow a testing procedure recently proposed by Zivot and Andrews (1992). Cointegration analysis of wages and prices in the presence of structural breaks finds empirical evidence in favour of two cointegrating vectors involving prices and wages. Our analysis focuses on the different structural behaviour of the price-wage dynamic relationship in the short and long term; we also demonstrate the relative importance of import prices as a source of wage-price fluctuations.

Modelling shifts in the wage–price and unemployment–inflation relationships in Italy, Poland and the UK

“…The annual data for Poland are taken from the dataset in Welfe (1991) and Welfe (1996), and cover the period 1960-1989. Golinelli and Orsi (1994 and Golinelli and Orsi (1996) contain related analyses using quarterly data.…”