Wage Indexation and Macroeconomic Stability [electronic resource] : The Gray-Fischer Theorem Revisted / Esteban Jadresic.
Material type:
TextSeries: IMF Working Papers; Working Paper ; No. 96/121Publication details: Washington, D.C. : International Monetary Fund, 1996Description: 1 online resource (24 p.)ISBN: 1451854331 :ISSN: 1018-5941Subject(s): Inflation | Money Supply | Wage Indexation | Wage | Wages | United StatesAdditional physical formats: Print Version:: Wage Indexation and Macroeconomic Stability : The Gray-Fischer Theorem RevistedOnline resources: IMF e-Library | IMF Book Store Abstract: Since the seminal papers by Gray (1976) and Fischer (1977) were published, the major theorem of the wage indexation literature has been that indexing wages stabilizes output when shocks are nominal and destabilizes output when shocks are real. This paper reexamines the validity of this proposition taking into account the lags in actual indexation practices in an economy similar to that originally considered by those authors. It shows that in such a setup, wage contracts indexed to lagged inflation tend to destabilize output regardless of whether shocks are nominal or real.
Since the seminal papers by Gray (1976) and Fischer (1977) were published, the major theorem of the wage indexation literature has been that indexing wages stabilizes output when shocks are nominal and destabilizes output when shocks are real. This paper reexamines the validity of this proposition taking into account the lags in actual indexation practices in an economy similar to that originally considered by those authors. It shows that in such a setup, wage contracts indexed to lagged inflation tend to destabilize output regardless of whether shocks are nominal or real.
Description based on print version record.
There are no comments on this title.