Inflation adjustment in the open economy: an I(2) analysis of UK prices.
This paper estimates a cointegrated vector autoregressive (VAR) model for UK data on consumer prices, unit labour costs, import prices and real consumption growth. The estimated VAR indicates that the nominal variables are characterised by I(2) trends, and that a linear combination of these processe...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Physica Verlag, An Imprint of Springer-Verlag GmbH
2006
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| _version_ | 1797098737432002560 |
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| author | Nielsen, H Bowdler, C |
| author_facet | Nielsen, H Bowdler, C |
| author_sort | Nielsen, H |
| collection | OXFORD |
| description | This paper estimates a cointegrated vector autoregressive (VAR) model for UK data on consumer prices, unit labour costs, import prices and real consumption growth. The estimated VAR indicates that the nominal variables are characterised by I(2) trends, and that a linear combination of these processes cointegrate to I(1). This supports an analysis in which I(1) and I(2) restrictions are imposed. A key finding is that an increase in real import prices reduces productivity adjusted real wages, such that the change in domestic inflation is moderated. This may explain why the depreciation of sterling in 1992 left inflation unchanged. |
| first_indexed | 2024-03-07T05:13:54Z |
| format | Journal article |
| id | oxford-uuid:dc7e5305-5434-4403-a70e-e0e224cf1fdc |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T05:13:54Z |
| publishDate | 2006 |
| publisher | Physica Verlag, An Imprint of Springer-Verlag GmbH |
| record_format | dspace |
| spelling | oxford-uuid:dc7e5305-5434-4403-a70e-e0e224cf1fdc2022-03-27T09:18:09ZInflation adjustment in the open economy: an I(2) analysis of UK prices.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:dc7e5305-5434-4403-a70e-e0e224cf1fdcEnglishDepartment of Economics - ePrintsPhysica Verlag, An Imprint of Springer-Verlag GmbH2006Nielsen, HBowdler, CThis paper estimates a cointegrated vector autoregressive (VAR) model for UK data on consumer prices, unit labour costs, import prices and real consumption growth. The estimated VAR indicates that the nominal variables are characterised by I(2) trends, and that a linear combination of these processes cointegrate to I(1). This supports an analysis in which I(1) and I(2) restrictions are imposed. A key finding is that an increase in real import prices reduces productivity adjusted real wages, such that the change in domestic inflation is moderated. This may explain why the depreciation of sterling in 1992 left inflation unchanged. |
| spellingShingle | Nielsen, H Bowdler, C Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title | Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title_full | Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title_fullStr | Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title_full_unstemmed | Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title_short | Inflation adjustment in the open economy: an I(2) analysis of UK prices. |
| title_sort | inflation adjustment in the open economy an i 2 analysis of uk prices |
| work_keys_str_mv | AT nielsenh inflationadjustmentintheopeneconomyani2analysisofukprices AT bowdlerc inflationadjustmentintheopeneconomyani2analysisofukprices |