INFLATION AND INCOMES POLICY UNDER A CURRENCY BOARD: THE BULGARIAN CASE
INFLATION AND INCOMES POLICY UNDER A CURRENCY BOARD: THE BULGARIAN CASE

Summary/Abstract: This study examines the relationship between nominal salary and inflation in Bulgaria under a currency board. A theoretical background of the connection between incomes policy and inflation is provided. Autoregression with distributed lag (ARDL) is employed to analyze the relationship between the percentage change of average nominal salary, the rate of inflation, and the percentage change of average real labor productivity. The time-series data include observations from the third quarter of 1997 to the first quarter of 2022. The study results indicate the existence of both short-term and long-term relationships between inflation and the nominal change in average salary. It is also found that the link between the changes in nominal salary and real labor productivity is broken both in the short and the long term.

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