; and, when prices and wages are not reoptimized, they can be partially adjusted to previous-period aggregate inflation. The …This paper analyzes the dynamics of prices and wages using a limited information approach to estimation. I estimate a … two-equation model for the determination of prices and wages derived from an optimization-based dynamic model in which …

conclusion is to make wages and the nominal exchange rate anchors for the price level, which implies that nominal wages should … increase according to trends in productivity and the target inflation rate of the central bank. Wage developments without …