Affordable Access

WAGE-PRICE DYNAMICS AND DEFLATION IN HONG KONG

Authors
Disciplines
  • Economics

Abstract

We provide empirical evidence on the dynamics of prices and wages in Hong Kong. The results suggest that the post-1997 deflation can be understood using a conventional macroeconomic framework wherein foreign influences constitute the basic underlying shocks, and adjustment processes in domestic wages and prices determine the details of the transmission mechanism. We find that the decline in local nominal prices owes much to declining prices of imported intermediate goods. The negative output gap and increase in unemployment during the deflation period also have their origin in foreign shocks, but the domestic wage adjustment process is an important contributing factor. Copyright 2005 Blackwell Publishing Ltd

There are no comments yet on this publication. Be the first to share your thoughts.