Indexation Lags and Heterodox Stabilization Programs

Steven Ambler () and Emanuela Cardia ()

No 35, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

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.

Keywords: anti-inflation stabilization; nominal rigidities; wage indexation (search for similar items in EconPapers)
JEL-codes: E32 E6 (search for similar items in EconPapers)
Date: 1994-11
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Persistent link: http://EconPapers.repec.org/RePEc:cre:crefwp:35

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