Wage Indexation and Time-Consistent Monetary Policy

This paper investigates the effects of wage indexation on the time-consistent level of inflation. Departing from previous work on time-consistent policy, we study a structural model of the economy. Indexation reduces the cost of inflation, which is inflationary, and steepens the Phillips curve, which is anti-inflationary. In most cases, the net effect is to raise inflation but also to raise welfare: the loss from higher inflation is outweighed by the gain from greater protection against inflation

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Year of publication:	[2021]
Authors:	Ball, Laurence M. ; Cecchetti, Stephen G.
Publisher:	[S.l.] : SSRN
Subject:	Lohnindexierung \| Wage indexation \| Geldpolitik \| Monetary policy \| Theorie \| Theory \| Zeitkonsistenz \| Time consistency