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Monetary Regimes And Endogenous Wage Contracts: Sweden 1908-1995

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Author Info

  • Fregert, Klas

    ()
    (Department of Economics, Lund University)

  • Jonung, Lars

    ()
    (Department of Economics, Stockholm School of Economics)

Abstract

We examine Gray´s theory of endogenous length of wage contracts and inflation indexation, using a uniquely long data set of blue-collar worker collective agreements in Sweden 1908-1995. Volatile monetary regimes, i. e. regimes with large macroeconomic uncertainty, are associated with short length and inflation indexed contracts. We also find inertia in changes in contract characteristics to changes in the regime. The findings support the Lucas critique, but cautions against simple divisions of time series in different regimes wherein agents' decision rules are assumed constant.

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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 1998:3.

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Length: 30 pages
Date of creation: 01 Jun 1998
Date of revision: 21 Apr 1999
Publication status: Published in Economics: The Open-Access, Open-Assessment E-Journal, 2008, pages 1-25.
Handle: RePEc:hhs:lunewp:1998_003

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Related research

Keywords: Monetary regime; contract length; wage indexation; Lucas critique;

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References

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  1. repec:nbr:nberre:0126 is not listed on IDEAS
  2. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
  3. Fethke, Gary C & Policano, Andrew J, 1981. "Cooperative Responses by Public and Private Agents to Aggregate Demand and Supply Disturbances," Economica, London School of Economics and Political Science, vol. 48(190), pages 155-71, May.
  4. Fischer, Stanley, 1977. "`Long-term contracting, sticky prices, and monetary policy' : A comment," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 317-323, July.
  5. Dye, Ronald A, 1985. "Optimal Length of Labor Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 251-70, February.
  6. Gray, Jo Anna, 1978. "On Indexation and Contract Length," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 1-18, February.
  7. Jonung, Lars, 1986. "Uncertainty about inflationary perceptions and expectations," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 315-325, September.
  8. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  9. Christofides, L. N. & Wilton, D. A., 1983. "The determinants of contract length : An empirical analysis based on Canadian micro data," Journal of Monetary Economics, Elsevier, vol. 12(2), pages 309-319.
  10. Blanchard, Olivier Jean, 1979. "Wage Indexing Rules and the Behavior of the Economy," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 798-815, August.
  11. Green, Steven L., 1987. "Theories of inflation : A review essay," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 169-175, July.
  12. Stanley Fischer, 1986. "Contracts, Credibility, and Disinflation," NBER Working Papers 1339, National Bureau of Economic Research, Inc.
  13. Holland, A Steven, 1986. "Wage Indexation and the Effect of Inflation Uncertainty on Employment:An Empirical Analysis," American Economic Review, American Economic Association, vol. 76(1), pages 235-43, March.
  14. Aizenman, Joshua & Frenkel, Jacob A, 1986. "Supply Shocks, Wage Indexation and Monetary Accommodation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(3), pages 304-22, August.
  15. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  16. Aizenman, Joshua, 1984. "Optimal wage re-negotiation in a closed and open economy," Journal of Monetary Economics, Elsevier, vol. 13(2), pages 251-262, March.
  17. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  18. Fischer, Stanley, 1985. "Supply Shocks, Wage Stickiness, and Accommodation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(1), pages 1-15, February.
  19. Wallace Hendricks & Larry M. Kahn, 1983. "Cost-of-living clauses in union contracts: Determinants and effects," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(3), pages 447-460, April.
  20. McCallum, John, 1983. "Stabilization Policy and Endogenous Wage Stickiness," American Economic Review, American Economic Association, vol. 73(3), pages 414-19, June.
  21. Fethke, Gary & Policano, Andrew, 1984. "Wage contingencies, the pattern of negotiation and aggregate implications of alternative contract structures," Journal of Monetary Economics, Elsevier, vol. 14(2), pages 151-170, September.
  22. Dye, Ronald A, 1985. "Costly Contract Contingencies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 233-50, February.
  23. Cooley, Thomas F & LeRoy, Stephen F & Raymon, Neil, 1984. "Econometric Policy Evaluation: Note," American Economic Review, American Economic Association, vol. 74(3), pages 467-70, June.
  24. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
  25. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
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Citations

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Cited by:
  1. Philip Ducaju & Erwan Gautier & Daphné Momferatou & Mélanie Ward-Warmedinge, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Research 154, National Bank of Belgium.
  2. Lindé, Jesper, 2000. "Testing for the Lucas Critique: A Quantitative Investigation," Working Paper Series 113, Sveriges Riksbank (Central Bank of Sweden).
  3. William B. English & J. David López-Salido & Robert J. Tetlow, 2013. "The Federal Reserve's framework for monetary policy - recent changes and new questions," Finance and Economics Discussion Series 2013-76, Board of Governors of the Federal Reserve System (U.S.).
  4. Lindé, Jesper, 2000. "Monetary Policy Analysis in Backward-Looking Models," Working Paper Series 114, Sveriges Riksbank (Central Bank of Sweden).

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