Inflation and the real wage in Yugoslavia

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James H. Gapinski

Abstract

This paper explains Yugoslav wage inflation and price inflation and uses those explanations to derive implications for the real wage. Data that run annually from 1952 to 1987 support the estimations, which proceed by the Beach-MacKinnon method and by three-stage least squares. Among its main findings, the paper shows that labor market conditions become a progressively weaker determinant of wage inflation and that price inflation depends upon a combination of factors including the growth in intended and unintended credit. To improve the real wage, it argues that credit must be severely restricted and that incomes policy merits consideration.

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