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Monetary Regimes And Endogenous Wage Contracts: Sweden 1908-1995

Author

Listed:
  • Fregert, Klas

    () (Department of Economics, Lund University)

  • Jonung, Lars

    () (Department of Economics, Stockholm School of Economics)

Abstract

We examine Gray´s theory of endogenous length of wage contracts and inflation indexation, using a uniquely long data set of blue-collar worker collective agreements in Sweden 1908-1995. Volatile monetary regimes, i. e. regimes with large macroeconomic uncertainty, are associated with short length and inflation indexed contracts. We also find inertia in changes in contract characteristics to changes in the regime. The findings support the Lucas critique, but cautions against simple divisions of time series in different regimes wherein agents' decision rules are assumed constant.

Suggested Citation

  • Fregert, Klas & Jonung, Lars, 1998. "Monetary Regimes And Endogenous Wage Contracts: Sweden 1908-1995," Working Papers 1998:3, Lund University, Department of Economics, revised 21 Apr 1999.
  • Handle: RePEc:hhs:lunewp:1998_003
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    References listed on IDEAS

    as
    1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    2. Fethke, Gary C & Policano, Andrew J, 1981. "Cooperative Responses by Public and Private Agents to Aggregate Demand and Supply Disturbances," Economica, London School of Economics and Political Science, vol. 48(190), pages 155-171, May.
    3. Green, Steven L., 1987. "Theories of inflation : A review essay," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 169-175, July.
    4. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    5. Stanley Fischer, 1984. "Contracts, Credibility, and Disinflation," NBER Working Papers 1339, National Bureau of Economic Research, Inc.
    6. Aizenman, Joshua, 1984. "Optimal wage re-negotiation in a closed and open economy," Journal of Monetary Economics, Elsevier, vol. 13(2), pages 251-262, March.
    7. Fischer, Stanley, 1977. "`Long-term contracting, sticky prices, and monetary policy' : A comment," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 317-323, July.
    8. Wallace E. Hendricks & Lawrence M. Kahn, 1983. "Cost-of-Living Clauses in Union Contracts: Determinants and Effects," ILR Review, Cornell University, ILR School, vol. 36(3), pages 447-460, April.
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    Cited by:

    1. William B English & J David López-Salido & Robert J Tetlow, 2015. "The Federal Reserve’s Framework for Monetary Policy: Recent Changes and New Questions," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 22-70, May.
    2. Jesper Linde, 2002. "Monetary Policy Analysis in Backward-Looking Models," Annals of Economics and Statistics, GENES, issue 67-68, pages 155-182.
    3. Philip Du Caju & Erwan Gautier & Daphne Momferatu & Melanie Ward-Warmedinger, 2009. "Institutional Features of Wage Bargaining in 23 European Countries, the US and Japan," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 12(2), pages 57-108, Winter.
    4. Taylor, J.B., 2016. "The Staying Power of Staggered Wage and Price Setting Models in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    5. Jesper Linde, 2001. "Testing for the Lucas Critique: A Quantitative Investigation," American Economic Review, American Economic Association, vol. 91(4), pages 986-1005, September.

    More about this item

    Keywords

    Monetary regime; contract length; wage indexation; Lucas critique;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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