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Price and Wage Rigidities in the Republic of Macedonia: Survey Evidence from Micro- Level Data

Author

Listed:
  • Florian Huber

    (Vienna University of Economics and Business (WU))

  • Magdalena Petrovska

    (National Bank of the Republic of Macedonia)

Abstract

This paper exploits the information collected from an ad hoc survey conducted on a sample of Macedonian firms to study the extent of nominal price and wage rigidities in the Republic of Macedonia. The research was motivated by the observation that sticky prices influence the responsiveness of inflation to changes in a central bank’s policy rate. Against this background, the paper investigates the relative importance of most determinants of the frequency of price and wage changes identified in the literature. This paper presents a Bayesian analysis of ordinal data. Posterior inference is carried out using Markov Chain Monte Carlo (MCMC) techniques. Infusing the model with prior information allows us to shrink the parameter space, resulting in more precise and reliable parameter estimates. Our results suggest that higher price flexibility is associated with a higher degree of product market competition. Specifically, we find that firms facing high levels of domestic and international competition tend to adjust prices faster.

Suggested Citation

  • Florian Huber & Magdalena Petrovska, 2015. "Price and Wage Rigidities in the Republic of Macedonia: Survey Evidence from Micro- Level Data," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 49-64.
    • Handle: RePEc:onb:oenbfi:y:2015:i:1:b:3
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    References listed on IDEAS

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    2. Oyer, Paul, 2004. "Salary or Benefits?," Santa Cruz Department of Economics, Working Paper Series qt8xs3k3j8, Department of Economics, UC Santa Cruz.
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    5. Lebow David E & Saks Raven E & Wilson Beth Anne, 2003. "Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-30, October.
    6. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, February.
    7. Fernando Martins & M. Druant, 2009. "How are Firms’ Wages and Prices Linked: Survey Evidence in Europe," Working Papers w200918, Banco de Portugal, Economics and Research Department.
    8. Philip Vermeulen & Daniel A. Dias & Maarten Dossche & Erwan Gautier & Ignacio Hernando & Roberto Sabbatini & Harald Stahl, 2012. "Price Setting in the Euro Area: Some Stylized Facts from Individual Producer Price Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1631-1650, December.
    9. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2006. "Identifying the role of labor markets for monetary policy in an estimated DSGE model," CFS Working Paper Series 2007/07, Center for Financial Studies (CFS).
    10. Gani Ramadani & Nikola Naumovski, 2014. "Wage and Price Setting in Macedonia: Evidence from Survey Data," Working Papers 2015-05, National Bank of the Republic of North Macedonia.
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    Cited by:

    1. Gani Ramadani & Nikola Naumovski, 2014. "Wage and Price Setting in Macedonia: Evidence from Survey Data," Working Papers 2015-05, National Bank of the Republic of North Macedonia.
    2. Gani Ramadani, 2017. "Firms’ responses to shocks by price, wage and employment in Macedonia," Working Papers 2017-02, National Bank of the Republic of North Macedonia.
    3. Gani Ramadani, 2017. "Measuring wage and price stickiness using firm-level data and potential implications for monetary policy in Macedonia," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43, Bank for International Settlements.

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    More about this item

    Keywords

    price rigidity; wage rigidity; Bayesian inference; MCMC; survey data;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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