Monetary policy in the presence of asymmetric wage indexation
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.
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