ABSTRACT
Wage and price adjustment processes have been considered in various of the preceding chapters. We studied wage–price dynamics from a Tobinian perspective in Chapter 4 and in the preceding chapter in the context of a Harrodian type of knife-edge situation. In Chapter 7 we reconsidered the New Keynesian staggered wage and price dynamics in a continuous time framework from the viewpoint of the Rational Expectations school and the determincy analysis this solution method implies. In Chapter 9 the wage–price adjustment processes were embedded in a non-Walrasian framework and the rationing situations this approach gives rise to. In the following we will now formulate and estimate a wage–price interaction or spiral of a fairly general type which includes insider–outsider considerations as they were dicussed in Chapter 8 and which formally resembles the staggered wage and price formation rules of the New Keynesians. It does however not at all give rise to conclusions which can be related to those that arose in the context of Chapter 7 and its jump-variable solution technique.
