Cost of Living Adjustment and Business Cycles: Disaggregated Evidence

Magda Kandil

No 2000/124, IMF Working Papers from International Monetary Fund

Abstract: For a sample of US industries, nominal wage and price inflation follow aggregate price inflation closely during economic expansions. Hence, fluctuations in profit markup and real output are moderate in the face of expansionary demand shocks. During recessions, however, industrial nominal wage deflation exceeds that of the aggregate price level. This is in contras to producers’ attempt to maintain, or even increase, industrial real price inflation during recessions. Consistently, the increase in the profit markup is correlated with an increase in output contraction and a reduction in workers’ real standard of living during recessions.

Keywords: WP; nominal wage; standard of living; aggregate demand; Business Cycles; Nominal Flexibility; price inflation; profit markup; markup inflation; output price; Inflation; Wages; Real wages; Cost of living (search for similar items in EconPapers)
Pages: 42
Date: 2000-07-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=3672 (application/pdf)

Related works:
Journal Article: COST-OF-LIVING ADJUSTMENTS AND BUSINESS CYCLES: DISAGGREGATED EVIDENCE (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2000/124

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().