The Role of Excess Demand in the Australian Price Equation

Models of the inflationary process in advanced industrial economies invariably include a equation, i.e. an equation that seeks to explain either the level or the rate of change of an index of prices in the pricemaking sector of the economy as a whole. In recent years the price equation has been extensively investigated in a series of important empirical studies of which the best known, perhaps, are the US studies of Schultze and Tryon (1965) and Eckstein and Fromm (1968), the British studies of Neild (1963) and Godley and Nordhaus (1972) and the international study of Ball and Duffy (1972). One basic question that is investigated in all of these studies is: assuming that price is fixed by applying a mark-up to unit cost, does the mark-up rise and fall with the degree of demand pressure in the commodity market? The main object of this paper is to consider this question in relation to the Australian economy

Commodity · Econometrics · Economics · Economy · Macroeconomics · Market economy · Price index · Price level · Economic Theory and Policy · Global trade and economics · Monetary Policy and Economic Impact

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