Labour Productivity and Unit Labour Costs Impact on Inflation: What Are the Implications for Monetary Policy?

2017 ◽  
pp. 181-191
Author(s):  
Eliphas Ndou ◽  
Nombulelo Gumata
Keyword(s):  
Monetary Policy ◽  
Labour Productivity ◽  
Labour Costs ◽  
Unit Labour Costs

scholarly journals Restoring international competitiveness in Croatia: The role of fiscal and monetary policy

2013 ◽  
Vol 58 (199) ◽  
pp. 39-55
Author(s):  
Tomislav Coric ◽  
Hrvoje Simovic ◽  
Milan Deskar-Skrbic
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Fiscal Policy ◽  
International Competitiveness ◽  
Real Effective Exchange Rate ◽  
Labour Costs ◽  
Unit Labour Costs ◽  
Effective Exchange ◽  
Effective Exchange Rate

Croatia has joined the European Union as a country with several substantial structural problems, of which the most important is weak competitiveness. Although competitiveness can be viewed from the ?institutional? perspective, which includes World Development Indicators (WDI) and Doing Business reports, in this paper the authors focus on the more standard view of competitiveness based on unit labour costs (ULC) and real effective exchange rate (REER). As a small, open and highly dollarized/euroised economy that has to coordinate its economic policy with the EU policy framework, Croatia has limited space for increasing international competitiveness using monetary policy measures aimed at (nominal) devaluation of the national currency. Therefore economic policy stakeholders should focus on decreasing unit labour costs and real effective exchange rate mainly through the process of internal devaluation, which is based on adequate fiscal policy measures. In this paper the authors analyse the role of monetary and fiscal policy in the deteriorating real effective exchange rate and unit labour costs since 2000, and their current capabilities and restrictions in restoring international competitiveness. The Structural VAR model (SVAR) is used to estimate the effects of foreign (banking) capital, credit growth, and current public expenditure on REER and ULC. The preliminary hypothesis of the paper is that monetary policy should continue to support bank lending activities and the role of fiscal policy is to achieve an internal devaluation, which will increase the competitiveness of the Croatian economy. Restoring international competitiveness is necessary due to its impact on net exports and consequently the economic recovery of the national economy, which has faced recession conditions for five years in a row. Also, restoring competitiveness is one of the most important preconditions for the success of a small country joining the single European market.

scholarly journals Deflation und Arbeitsmarkt in Japan

2004 ◽  
Vol 34 (134) ◽  
pp. 85-104
Author(s):  
Cornelia Kaiser
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Nominal Wage ◽  
Credit Crunch ◽  
Labour Costs ◽  
Unit Labour Costs

Since the mid 1990s, Japan suffers from a deflationary constellation. The deflation was triggered off by the crash of the stock market in Japan at the end 1980s, and the following credit crunch as banks in Japan stopped to issue credits. The final and most important factor for explaining the deflation is the collapse of the nominal wage anchor. Wages in Japan rose extremely below the increases of productivity. The resulting decrease in unit-labour costs stimulated deflation. Japan also shows how weak monetary policy becomes in a situation of deflation.

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