Monetary policy in the presence of asymmetric wage indexation
AbstractWe study optimal monetary policy in the presence of asymmetric wage indexation. We find that the monetary authorities do not react to small output shocks, and that their reaction to large shocks is asymmetric, insofar as they absorb positive shocks more than negative ones. As a consequence, we observe that asymmetric wage indexation can be contractionary. It has ambiguous effects on expected inflation and welfare relative to an equivalent symmetric indexation. Optimal symmetric inflation, however, always outperforms optimal asymmetric indexation.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/8354.
Date of creation: Jul 2008
Date of revision:
Publication status: Published in: Southern Economic Journal (2008) v.75 n° 1,p.69-90
E30; £61. J30; monetary policy; wage indexation;
Other versions of this item:
- Giuseppe Diana & Pierre-Guillaume Méon, 2008. "Monetary Policy in the Presence of Asymmetric Wage Indexation," Southern Economic Journal, Southern Economic Association, vol. 75(1), pages 69-90, July.
- Giuseppe Diana & Pierre-Guillaume Méon, 2005. "Monetary policy in the presence of asymmetric wage indexation," DULBEA Working Papers 05-16.RS, ULB -- Universite Libre de Bruxelles.
- Giuseppe Diana & Pierre-Guillaume Méon, 2003. "Monetary policy in the presence of asymmetric wage indexation," Working Papers of LaRGE Research Center 2003-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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