Wage Indexation, Inflation Inertia, and the Cost of Disinflation

Javier Gómez. ()
Authors registered in the RePEc Author Service: Javier G. Gómez-Pineda

Revista ESPE - Ensayos Sobre Política Económica, 2003, vol. 21, issue 43, No 5297, 66-85

Abstract: What are the consequences of wage negotiations on monetary policy in acountry that is in transition to lower inflation? We show that wageindexation to expected inflation, increased central bank credibility and ahigher frequency of wage adjustments can increase the effect of monetarypolicy and can decrease the cost of disinflation. Important welfare gainscan be obtained with the best possible performance in the pursuit ofinflation targets and with the highest possible precision in inflationforecasts since these actions increase central bank credibility. Wage policieslike the one proposed by the Colombian Constitutional Court can haveimportant negative consequences on output and real wages.

Keywords: wage indexation; disinflation; sacrifice ratio; staggered wage contracts; credibility. (search for similar items in EconPapers)
JEL-codes: E1 E17 E27 E52 J30 (search for similar items in EconPapers)
Date: 2003
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https://doi.org/10.32468/Espe.4303

Related works:
Journal Article: Wage Indexation, Inflation Inertia, and the Cost of Disinflation (2003)
Journal Article: Wage Indexation, Inflation Inertia, and the Cost of Disinflation (2003)
Working Paper: Wage Indexation, Inflation Inertia, and the Cost of Disinflation (2002)
Working Paper: Wage Indexation, Inflation Inertia, and The Cost of Disinflation (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000107:005297

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