Wage Indexation and Output Stability Revisited

Esteban Jadresic

Journal of Money, Credit and Banking, 2002, vol. 34, issue 1, 178-96

Abstract: Since Gray (1976) and Fischer (1977), the accepted view is that wage indexation stabilizes output when shocks are nominal and destabilizes output when shocks are real. This paper examines this proposition's validity when wage indexation is based on lagged inflation. It shows that: (i) in a Gray-Fischer economy with plausible parameters, indexing wages to lagged inflation destabilizes output regardless of the type of shocks; (ii) the Gray-Fischer result may be restored if nominal shocks have a strong direct effect on prices, given wages; and (iii) wage indexation to lagged inflation can be neutral for output stability if monetary policy is accommodative.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (4)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:34:y:2002:i:1:p:178-96

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().