Inflation may lead to wage increase but there is no evidence the other way around
What was Mr Tharman talking about? My layman brain is throbbing with a big, fat headache. Are there any economists out there that can explain? Our Finance Minister says that wage increases will fuel a second round of inflation. I have been trying to work out the dynamics in my mind as rationally as I can. I have tried speaking to people to see if anyone can shed light on the relationship between wages and inflation. Looks like it can be argued both ways (for and against the Minister’s proposition). After doing a bit of google-searching, I have discovered this excellent policy discussion paper: “Does Wage Inflation Cause Price Inflation?” by Gregory D. Hess and Mark E. Schweltzer (Policy Discussion Paper, Number 10, April 2000), Federal Reserve Bank of Cleveland Gregory D. Hess is the Danforth-Lewis Professor of Economics at Oberlin College and an academic consultant to the Federal Reserve Bank of Cleveland. Mark E. Schweitzer is an economist at the Federal Reserve Bank of Clevela...