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The Macroeconomic Consequences of Wage Indexation Revisited

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  • Mr. Esteban Jadresic

Abstract

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.

Suggested Citation

  • Mr. Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," IMF Working Papers 1998/015, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1998/015
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    2. Víctor López Pérez, 2003. "Wage Indexation and Inflation Persistence," Working Papers wp2003_0303, CEMFI.
    3. Alberto Naudon & Joaquín Vial, 2016. "The evolution of inflation in Chile since 2000," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation mechanisms, expectations and monetary policy, volume 89, pages 93-116, Bank for International Settlements.
    4. Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Staff Working Papers 01-16, Bank of Canada.

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