Optimal Monetary Policy and Wage Indexation under Alternative Disturbances and Information Structures
AbstractThe interdependence between the optimal degree of wage indexation and optimal monetary policy is analyzed for a small open economy under a variety of assumptions regarding: (1) relative information available to private agents and the stabilization authority; and (2 ) the perceived nature of the disturbances impinging on the economy. The distinctions between: (1) unanticipated and anticipated disturbances, and (2) permanent and transitory disturbances, are emphasized. The extent to which stabilization is achieved is shown to depend upon the nature of the disturbances and the available information. The policy redundancy issue is emphasized, implying that optimal rules can frequently be specified in many equivalent ways. Copyright 1987 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 19 (1987)
Issue (Month): 2 (May)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Stephen J. Turnovsky, 1986. "Optimal Monetary Policy and Wage Indexation Under Alternative Disturbances and Information Structures," NBER Working Papers 2042, National Bureau of Economic Research, Inc.
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- Mark P. Taylor & Lucio Sarno, 2001.
"Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?,"
Journal of Economic Literature,
American Economic Association, vol. 39(3), pages 839-868, September.
- Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers 2690, C.E.P.R. Discussion Papers.
- Ernst Fehr & Franz Hof, 1994. "Wage bargaining and shock sensitivity of a small open economy," Journal of Economics, Springer, vol. 59(3), pages 259-286, October.
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