Growth, Commodity Prices, Inflation and the Distribution of Income

Abstract

A primary commodity price boom is underway. Given the role of internationally traded primary commodities as inputs into the productive process in the industrialized world, an important question arises; namely what effects will this price-boom exert upon wage and price inflation in industrialized countries? In order to address this question, we specify and estimate a system of equations in which the key dependent variables are world commodity prices, the domestic inflation rate for finished goods and the rate of domestic industrial wage inflation. This model is estimated against data for each of three major industrialized countries: Japan, the UK and the USA and the implications of the results thus obtained are explored.