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Wage Indexation And The Monetary Policy Regime

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  • Selien De Schryder
  • Gert Peersman
  • Joris Wauters

Abstract

We estimate a New Keynesian wage Phillips curve for a panel of 24 OECD countries, and allow the degree of wage indexation to past inflation to vary according to the monetary policy regime. We .find that the extent of wage indexation is significantly lower in an inflation targeting regime, in contrast to monetary targeting, exchange rate targeting and policy regimes without an explicit quantitative anchor. The results put into question whether embedding a constant degree of wage indexation in standard DSGE models is truly structural.

Suggested Citation

  • Selien De Schryder & Gert Peersman & Joris Wauters, 2014. "Wage Indexation And The Monetary Policy Regime," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/892, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:14/892
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    Cited by:

    1. Carrillo, Julio A. & Peersman, Gert & Wauters, Joris, 2022. "Endogenous wage indexation and aggregate shocks," Journal of Macroeconomics, Elsevier, vol. 72(C).
    2. Antonia López-Villavicencio & Sophie Saglio, 2017. "The Wage Inflation-Unemployment Curve at the Macroeconomic Level," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(1), pages 55-78, February.
    3. Patrizio Tirelli & Maria Ferrara, 2020. "Disinflation, Inequality, And Welfare In A Tank Model," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1297-1313, July.
    4. Donayre, Luiggi & Panovska, Irina, 2016. "Nonlinearities in the U.S. wage Phillips curve," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 19-43.
    5. Donayre, Luiggi & Panovska, Irina, 2018. "U.S. wage growth and nonlinearities: The roles of inflation and unemployment," Economic Modelling, Elsevier, vol. 68(C), pages 273-292.

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    More about this item

    Keywords

    wage indexation; monetary policy regimes; cross-country panel; Phillips curve;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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