Labor Productivity and Inflation in Selected Oil-Exporting Countries

This paper investigates the relationship between inflation and labor productivity in some selected oil-exporting countries. In this study, we test short and long run causality during the period 1982 to 2007 based on panel co integration and error correction method (ECM). Moreover, for the first time, we have used the Toda-Yamamoto method for panel data to investigate this relation. The results show the one-way causality running from inflation to productivity of labor. These findings indicate that the inflation in most oil exporting countries is driven by the demand side factors. On the other hand, inflation will reduce labor productivity in these countries.