1. Introduction 1

2. Prices: Model, Estimation, and Evaluation 4
2.1 Model of prices 4
2.2 Estimation of price equation 5
2.3 Evaluation of recent performance of price equation 6

3. Wages: Model, Estimation, and Evaluation 7
3.1 Wage model 7
3.2 Estimates of baseline wage equation 7
3.3 Evaluation of recent wage-equation performance 8
3.4 V-U variant 9

4. Model Simulations 9

5. Conclusions 12

Appendix 14
Assumptions for the natural rate of unemployment 14
Evaluating the recent performance of the V-U version of the wage equation 14

References 16