A note on the welfare consequences of wage indexing in a stochastic economy

Pierre-Guillaume Méon

Portuguese Economic Journal, 2004, vol. 3, issue 3, No 1, 179-187

Abstract: Abstract. This note surveys the welfare and real consequences of wage indexing in a stochastic economy whose monetary authority lacks credibility. It shows in a unified framework that those consequences might differ markedly depending on the nature and timing of the dominant disturbance in that economy. It finally provides a closed-form expression of the optimal level of wage indexing when all the shocks are taken into account.

Keywords: Monetary policy; Credibility; Wage indexation (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s10258-004-0028-9

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