This paper investigates the persistence of aggregate wages and prices in Portugal assuming a model of a unionized economy with imperfect competition. An impulse response analysis is conducted where the structural shocks are identified by taking into account the long-run properties of the model,...

This paper rehabilitates the old wage price spiral. It shows that, after an increase in aggregate demand, the process of adjustment of nominal prices and nominal wages results from attempts by workers to maintain or increase their real wage and by firms to maintain or increase their markups of...