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Policy Discussion Papers

Does Wage Inflation Cause Price Inflation?

Recent attention has turned from unemployment levels to wage growth as an indicator of imminent inflation. But is there any evidence to support the assumption that increased wages cause inflation? This study updates and expands earlier research into this question and finds little support for the view that higher wages cause higher prices. On the contrary, the authors find more evidence that higher prices lead to wage growth.

Suggested Citation

Schweitzer, Mark E., and Gregory Hess. 2000. “Does Wage Inflation Cause Price Inflation?” Federal Reserve Bank of Cleveland, Policy Discussion Papers No. 1.