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Stabilization with Wage Indexation and Exchange Rate Flexibility

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  • Van Gompel, J

Abstract

This survey examines the role of wage indexation and exchange rate policy in dampening fluctuations in output around its target level. It is demonstrated that the appropriate choice for wage indexation and exchange rate flexibility is highly sensitive to the nature and the relative importance of the shocks impinging upon the economy, as well as to the relevant parameters in the economy. Moreover, the question of the desired flexibility of the exchange rate should be studied in the context of wage indexation, and vice versa. This interdependence raises the possibility of both policies being complements or substitutes to each other depending on the number of shocks that perturb the economy. Copyright 1994 by Blackwell Publishers Ltd

Suggested Citation

  • Van Gompel, J, 1994. "Stabilization with Wage Indexation and Exchange Rate Flexibility," Journal of Economic Surveys, Wiley Blackwell, vol. 8(3), pages 251-281, September.
    • Handle: RePEc:bla:jecsur:v:8:y:1994:i:3:p:251-81
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    Cited by:

    1. Joseph Daniels & David VanHoose, 1998. "Two-Country Models of Monetary and Fiscal Policy: What Have We Learned? What More Can We Learn?," Open Economies Review, Springer, vol. 9(3), pages 265-284, July.
    2. Fernando Lefort & Klaus Schmidt-Hebbel, 2002. "Indexation, Inflation and Monetary Policy: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.),Indexation, Inflation and MOnetary Policy, edition 1, volume 2, chapter 1, pages 001-018, Central Bank of Chile.
    3. Pierre-Richard Agénor, 2005. "The Analytics of Segmented Labor Markets," Economics Discussion Paper Series 0529, Economics, The University of Manchester.
    4. Jordan, Thomas J., 1999. "Central bank independence and the sacrifice ratio," European Journal of Political Economy, Elsevier, vol. 15(2), pages 229-255, June.
    5. Mr. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," IMF Working Papers 1998/015, International Monetary Fund.
    6. Oscar Landerretche & Fernando Lefort & Rodrigo O. Valdés, 2002. "Causes and Consequences of Indexation: A Review of the Literature," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.),Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 2, pages 019-064, Central Bank of Chile.
    7. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," Working Papers Central Bank of Chile 35, Central Bank of Chile.

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