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The Macroeconomic Consequences of Wage Indexation Revisited

  • Esteban Jadresic
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    Since the mid-1970s, there has been considerable research on the macroeconomic consequences of wage indexation. Nonetheless, until recently, this research had not explicitly explored 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.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 98/15.

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    Length: 54
    Date of creation: 01 Feb 1998
    Date of revision:
    Handle: RePEc:imf:imfwpa:98/15
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    6. Stephen J. Turnovsky, 1983. "Wage Indexation and Exchange Market Interventions in a Small Open Economy," Canadian Journal of Economics, Canadian Economics Association, vol. 16(4), pages 574-92, November.
    7. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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    11. Van Gompel, J, 1994. " Stabilization with Wage Indexation and Exchange Rate Flexibility," Journal of Economic Surveys, Wiley Blackwell, vol. 8(3), pages 251-81, September.
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    23. Sebastian Edwards, 1996. "A Tale of Two Crises: Chile and Mexico," NBER Working Papers 5794, National Bureau of Economic Research, Inc.
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