Monetary policy in the presence of asymmetric wage indexation

Pierre-Guillaume Méon and Giuseppe Diana ()

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: 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 contractionary. It has ambiguous effects on expected inflation and welfare relative to an equivalent symmetric indexation. Optimal symmetric inflation, however, always outperforms optimal asymmetric indexation.

Keywords: E30, £61. J30; monetary policy, wage indexation (search for similar items in EconPapers)
Date: 2008-07
Note: SCOPUS: ar.j
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Citations: View citations in EconPapers (16)

Published in: Southern Economic Journal (2008) v.75 n° 1,p.69-90

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Related works:
Journal Article: Monetary Policy in the Presence of Asymmetric Wage Indexation (2008)
Working Paper: Monetary Policy in the Presence of Asymmetric Wage Indexation (2008)
Working Paper: Monetary policy in the presence of asymmetric wage indexation (2005)
Working Paper: Monetary policy in the presence of asymmetric wage indexation (2003)
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