Employment-wage relationship in Hong Kong.

Abstract

Using Geweke's approach to Weiner-Granger causalitly, we detected significance linear association between unemployment and wage growth in Hong Kong. Empirical evidence suggests that wage determination is essentially productivity driven and nominal wages do explain movements of industrial production index in Hong Kong. Since broad money significantly lead changes in prices while wages also significantly cause movements in prices, we therefore deduce that the inflation process in Hong Kong is basically a hybrid of cost-push and demand-pull hypothesis.