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The Macroeconomic Consequences of Wage Indexation Revisited

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  • 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 explored explicitly 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

  • Esteban Jadresic, 1998. "The Macroeconomic Consequences of Wage Indexation Revisited," Working Papers Central Bank of Chile 35, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:35
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_35.pdf
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    References listed on IDEAS

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    2. Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Staff Working Papers 01-16, Bank of Canada.
    3. Jonathan A. Attey & Casper G. de Vries, 2016. "Monetary Policy in the Presence of Random Wage Indexation," Tinbergen Institute Discussion Papers 16-086/VI, Tinbergen Institute.
    4. Víctor López Pérez, 2003. "Wage Indexation and Inflation Persistence," Working Papers wp2003_0303, CEMFI.

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