Analysis of the nature of cause-and-effect relationship between inflation and wage in Russia

Abstract

The nature of the cause-and-effect relationship between inflation and wages in Russia in 2003–2014 has been analyzed. The author has focused on defining the reliability of cost-push inflation theory and demand inflation theory based on Russian data using econometric methods (the Granger causality test and vector error-correction model). The stabilit y of the modeling results (for the purpose of excluding structural changes under the conditions of varying of the principles of Bank of Russia’s monetary policy during the transition to inflation targeting) is checked using the Gregory–Hansen method. In the article, the results are compared to the similar studies carried out for developed countries and countries with developing markets.