Testing for Equilibrium in the Australian Wage Equation

In this paper a range of unit root and cointegration tests are applied to the time‐series variables most commonly found in the various specifications of the Australian wage equation. We find a contradiction between the standard Dickey‐Fuller (DF) tests and the results from Johansen estimation regard...

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Bibliographic Details
Published inThe Economic record Vol. 69; no. 3; pp. 295 - 304
Main Authors LEWIS, PHILIP E.T., MacDONALD, GARRY A.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.09.1993
Economic Society of Australia
Subjects
Australia
Consumer Price Index
Economic conditions
Economic models
Equilibrium
Overtime
Overtime pay
Phillips curve
Studies
Time series
Unemployment
Variables
Wage price policy
Wages
Wages & salaries
Australia
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Summary:In this paper a range of unit root and cointegration tests are applied to the time‐series variables most commonly found in the various specifications of the Australian wage equation. We find a contradiction between the standard Dickey‐Fuller (DF) tests and the results from Johansen estimation regarding the order of integration. The conclusion we reach using tests developed by Perron (1989,1990) is that all the variables are trend stationary processes and that the cointegration framework is inappropriate in this case.
Bibliography:The authors would like to thank two anonymous referees for their helpful comments on an earlier version of this paper. We would also like to thank Sheila Anderson for excellent secretarial assistance.
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ISSN:0013-0249
1475-4932
DOI:10.1111/j.1475-4932.1993.tb02109.x