Wages, Prices and Unemployment in Poland

The paper aims to analyze long-run relationships between labor market trends, wages, prices, interest rates and the exchange rate in Poland. We use a research approach known as cointegrated VAR analysis, which makes it possible to identify long-run tendencies and common stochastic trends as well as estimate the adjustment dynamics of the system (the pulling and pushing forces). The results show that we can find stable long-run cointegration relationships between the unemployment rate, wages and prices. We can confirm our two main research hypotheses formulated on the basis of theoretical formulations. First of all, increasing product market competition seems to be the main driving force behind the convergence of the Polish economy with more advanced European economies during the analyzed period. Second, we can confirm that the Polish inflation rate has adapted to the European purchasing power parity level over the long run, and we can also confirm a kind of Balassa-Samuelson effect on consumer prices.