Evaluation of Wage-Inflation Association: Evidence form Uzbekistan

Bakhriddinov Vikorjon

Department of Macroeconomic Analyze and Forecasting, Tashkent State University of Economics, Islam Karimov street, 49. Tashkent city, Uzbekistan

Email: v.bakhriddinov@tsue.uz  

Abstract

Wage inflation is often a non-monetary phenomenon that has two basic explanations. First, inflation results from the government's stimulation of demand through an increase in official salaries. Second, when the labor market's demand for workers rises, wages rise as well, raising the cost of manufacturing and resulting in cost-push inflation. In developing economies, this process typically manifests itself in two ways at once. Thus, the objective of this research is to evaluate experimentally how pay increases affect inflation in Uzbekistan. We use a basic OLS model to examine the association between these variables. The findings indicate that wages and inflation in Uzbekistan have a somewhat favorable association. We have concluded that it is reasonable to indexation of official pay to the price level and implement an efficient supply policy in order to lessen the detrimental impact of wages on inflation.

Keywords: Wage inflation; consumer price index; Phillips curve; production cost; OLS model.