Do Wages Lead Inflation? Swiss Evidence
© Schweizerische Zeitschrift für Volkswirtschaft und Statistik 2007
Published: 29 December 2007
We construct a quarterly time series for nominal hourly wages and unit labour costs from 1975 onwards and investigate the empirical link between wages and CPI inflation in Switzerland in order to identify causality effects and assess the relevance of wages as an indicator for short-run price changes. We find evidence that prices systematically influence wages whereas the influence of wages on prices is much more sensitive to the choice of the sample period. In particular, the explanatory power of wages disappears in a low inflation environment. These findings move in the same direction as most evidence obtained with US data.