REAL WAGES EMPLOYMENT RELATIONSHIP IN FINNISH MANUFACTURING - A VAR APPROACH

Granger's concept of causality and the vector autoregressive (VAR) technique is used to investigate the real wages-employment relationship in Finnish manufacturing. The stationarity of the time series is examined and a number of co-integration tests for the adequacy of a pure VAR specification performed. The results using a bivariate VAR model based on a lag structure determined by Akaike's information criterion suggests that real wages Granger-cause employment. The slight non-constancy of the model suggests, however, that the conclusion concerning the nature of the real wages-employment relationship should be treated with caution. © 1991, Taylor & Francis Group, LLC. All rights reserved.