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Monetary policy in the presence of asymmetric wage indexation

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  • Giuseppe Diana
  • Pierre-Guillaume Méon

Abstract

We 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 recessionary and that it decreases the inflationary bias relative to an equivalent symmetric indexation.

Suggested Citation

  • 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.
  • Handle: RePEc:lar:wpaper:2003-06
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    More about this item

    Keywords

    Monetary policy; wage indexation.;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • 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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