Inertial factors are one the main reasons for the persistence of inflation and the high output losses of disinflation. However the removal of these factors can be costly in terms of popularity for the government : for example, unions may resist the reduction of lagged wage indexation. In this...

The paper examines cases in which from a production efficiency standpoint "big bang" programs are superior to gradualist programs. Nevertheless, in the presence of (I) uncertainty about the exogenous shocks, (ii) dependence of policy actions on the state of the economy, and (iii) uncertain...

It has long been recognized that contemporaneous wage indexation stabilizes output and employment in the face of monetary shocks, but hampers the adjustment of the economy to real shocks that require changes in the real wage. Another feature of wage indexing is that it reduces the incentive of...

The corporate governance problem of state enterprises in formerly centrally planned economies can give rise to excess wage claims and/or capital decumulation if workers and managers try to appropriate the firm''s assets before it is "commercialized" or privatized. Since state enterprises still...