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Price Formation in Denmark - Part 1
The development in Danish consumer prices has been stable for many years. Price stability is a key prerequisite for a well-functioning market economy, whereas high inflation is associated with serious economic consequences. Price formation in Denmark is analysed with a view to assessment of ongoing developments and identification of potential threats to the stable inflation regime. Core inflation and an index of domestic market-determined inflation are used to distinguish between the underlying reasons for consumer price increases. The analysis includes e.g. the microdata underlying the consumer price index. Moreover, an analysis of price and wage formation in the years 1975-2013 confirms interdependency between wages and prices, which may potentially lead to a wage-price spiral.