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Indexation Lags and Heterodox Stabilization Programs

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Abstract

This paper examines the role of wage indexation and indexation lags in stabilization programs. We analyze whether the added inflation inertia caused by such lags increases the importance of the heterodox aspects of anti-inflation stabilization programs, which involve the imposition of direct wage and price controls. For this purpose, we build a model of a small, open, semi-industrialized economy which incorporates nominal rigidities via staggered wage contracts. The model allows for a variable degree of indexation to the cost of living which is implemented with a variable lag. Nous examinons le rôle de l'indexation et des délais d'indexation pour la stabilisation économique. Nous analysons si l'inertie accrue due aux délais peut rendre plus importants les aspects hétérodoxes des programmes anti-inflation, aspects qui comprennent l'utilisation de contrôles directs sur les prix et les salaires. Pour cette fin, nous utilisons un modèle d'une petite économie semi-industrialisée avec une rigidité nominale qui provient de contrats de salaire chevauchés. Le modèle permet à la fois un degré d'indexation et un délai d'indexation variables.

Suggested Citation

  • Steve Ambler & Emanuela Cardia, 1994. "Indexation Lags and Heterodox Stabilization Programs," Cahiers de recherche CREFE / CREFE Working Papers 35, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:35
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    Cited by:

    1. Touhami, A. & Martens, A., 1996. "Macroemesures in Computable General Equilibrium Models: a Probabilistic Treatment with an Application to Morocco," Cahiers de recherche 9621, Universite de Montreal, Departement de sciences economiques.

    More about this item

    Keywords

    anti-inflation stabilization; nominal rigidities; wage indexation;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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