› › Some Macroeconomic Implications Of Wage Indexation


The Macroeconomic Consequences of Wage Indexation Revisited

Author : Mr.Esteban Jadresic

Publisher : International Monetary Fund

Page : 55 pages

File Size : 38,27 MB

Release : 1998-02-01

Category : Business & Economics

ISBN : 1451843232

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Book Description

Since the mid-1970s, there has been considerable research on the macroeconomic consequences of wage indexation. Nonetheless, until recently, this research had not explicitly explored the implications of contracts that index wages to lagged inflation, the usual type of wage indexation observed in practice. Drawing mainly on recent research by the author, this paper examines the consequences of wage indexation to lagged inflation on aggregate wage formation, the cost of disinflation under money- and exchange-rate-based stabilization, the variability of output under alternative shocks and policy regimes, the choice of exchange rate regime, and the level and variability of inflation.



Wage Indexation and Macroeconomic Stability

Author : Mr.Esteban Jadresic

Publisher : International Monetary Fund

Page : 24 pages

File Size : 16,63 MB

Release : 1996-11-01

Category : Business & Economics

ISBN : 1451854331

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Book Description

Since the seminal papers by Gray (1976) and Fischer (1977) were published, the major theorem of the wage indexation literature has been that indexing wages stabilizes output when shocks are nominal and destabilizes output when shocks are real. This paper reexamines the validity of this proposition taking into account the lags in actual indexation practices in an economy similar to that originally considered by those authors. It shows that in such a setup, wage contracts indexed to lagged inflation tend to destabilize output regardless of whether shocks are nominal or real.





Macroeconomic Performance Under Alternative Exchange Rate Regimes

Author : Mr.Esteban Jadresic

Publisher : International Monetary Fund

Page : 36 pages

File Size : 22,22 MB

Release : 1998-08-01

Category : Business & Economics

ISBN : 145194103X

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Book Description

This paper reexamines the macroeconomic effects of wage indexation in an open economy under alternative exchange rate regimes. The main finding is that, once the lags in actual indexation rules are considered, wage indexation affects output behavior substantially less than posited in the previous academic literature. This result implies that the academic view that wage indexation makes a flexible exchange rate generally preferable is unwarranted and suggests that the choice of exchange rate regime with and without wage indexation depends on similar factors. The analysis also reveals that the net effects of wage indexation on macroeconomic stability are ambiguous.



The Effects of Forward-Versus Backward-Looking Wage Indexationon Price Stabilization Programs

Author : Mr.Joe Crowley

Publisher : International Monetary Fund

Page : 35 pages

File Size : 27,68 MB

Release : 1997-04-01

Category : Business & Economics

ISBN : 1451845650

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Book Description

A standard open-economy model is used to show that price stabilization programs are more likely to succeed if labor contracts specify forward-looking wage indexation. Compared with contracts specifying backward-looking wage indexation or wages based on static expectations, such contracts will result in a greater reduction in inflation with lower output costs, smaller misalignment of real wages, smaller outflows of reserves, smaller disruptions caused by policy announcements, and a reduced impact of some shocks during price stabilization programs. These results are generally true whether or not capital is mobile and whether or not expectations are rational.



Wage and Public Debt Indexation

Author : Mr.Pablo Emilio Guidotti

Publisher : International Monetary Fund

Page : 34 pages

File Size : 10,85 MB

Release : 1992-08-01

Category : Business & Economics

ISBN : 1451848846

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Book Description

This paper examines the relationship between the degree of wage indexation chosen by private agents and the degree of indexation of the public debt. It is shown that the government is likely to respond to an increase in the degree of wage indexation by increasing the portion of the public debt that is indexed. By contrast, the effect of an increase in public debt indexation on the degree of wage indexation is ambiguous. In equilibrium, depending on the sources of shocks to the economy, the degree of wage indexation may be positively or negatively related to that of debt indexation. This relationship is analyzed both in situations where the policymakers are able to precommit policies and in those where precommitment is not possible.



Implications of Economic Interdependence and Exchange Rate Policy on Endogenous Wage Indexation Decisions

Author : Jay H. Bryson

Publisher :

Page : 46 pages

File Size : 43,9 MB

Release : 1996

Category : Equilibrium (Economics)

ISBN :

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Book Description

This paper shows how economic interdependence affects wage indexation decisions when monetary authorities do not observe stochastic disturbances. Under a managed exchange rate, atomistic wage setters in interdependent nations will choose the same degree of indexation as they would in a small open economy. Under a flexible exchange rate, the likelihood rises that they will choose a lower degree of indexation than their counterparts in a small open economy as the degree of interdependence rises, as the variance of money demand shocks rise relative to supply shocks, and as supply curves steepen. Finally, wage indexation choices are more likely to be strategic complements as the degree of interdependence rises and as the variance of money demand shocks rises relative to supply shocks.