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Economic Perspectives, Vol. 34, 2nd, No. 2, 2010
Do Labor Market Activities Help Predict Inflation?

Price stability is an important element in maintaining a healthy economy. Volatile prices, especially when unanticipated, can have a negative impact on aggregate demand, as people are not able to adjust and protect the real value of their financial wealth. The authors conduct an empirical analysis of the role of labor market activities in inflation and conclude that wage growth is not very informative for predicting price inflation. But price inflation does seem to help predict wage growth.

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